Kim Beom-su to Face Prosecutor Investigation... Kakao at 'Zero Hour'

Prosecutors Investigate Multiple Executives Over Alleged Market Manipulation

Kim Beom-su, founder of Kakao and head of the Future Initiative Center, is now facing a prosecution investigation over allegations of market manipulation involving SM Entertainment (SM). Following the emergence of this legal risk, Kakao, which was undergoing a major group restructuring led by Kim, is now facing an unpredictable crisis. Although he was sent to the prosecution without detention, the worst-case scenario has been avoided for now, but the prosecution could request an arrest warrant at any time.

Kim Beom-su, former chairman of Kakao, is attending an investigation on the 23rd at the Financial Supervisory Service in Yeongdeungpo-gu, Seoul, regarding allegations of stock price manipulation related to the acquisition of SM Entertainment. Photo by Kang Jin-hyung aymsdream@

On the 15th, the Financial Supervisory Service’s Special Judicial Police (Special Judicial Police) referred six individuals to the prosecution on charges of violating the Capital Markets Act, including Kim Beom-su, Hong Eun-taek, CEO of Kakao, Kim Sung-soo and Lee Jin-soo, co-CEOs of Kakao Entertainment, and lawyers from the law firm Yulchon, which provides legal counsel to Kakao. The allegations involve manipulating SM’s stock price last February to obstruct the public tender offer by competitor HYBE during the SM acquisition battle.

Although Kim stepped down as chairman of Kakao’s board last year and withdrew from frontline management, investigators believe his influence remains strong. On the 23rd of last month, the Special Judicial Police summoned Kim as a suspect and conducted an intensive 16-hour investigation regarding whether he directly ordered the market manipulation. The prosecution plans to decide whether to request an arrest warrant after conducting supplementary investigations.

With this referral, Kakao Group’s management is now subject to a series of prosecution investigations. Last month, the Special Judicial Police also referred Bae Jae-hyun, head of Kakao’s investment division, and Kakao Corporation itself to the prosecution with a recommendation for indictment on similar charges. On the 13th, the prosecution formally indicted Bae and Kakao Corporation.

With Kim and other key executives exposed to legal risks, Kakao is facing its greatest crisis ever. Notably, since the 30th, Kim has stepped out from his “reclusive executive” role to take a front-line position in management by holding weekly emergency community management meetings every Monday. On the 6th, he took charge as chairman of the Management Innovation Committee, personally leading crisis management efforts. After shaving off his trademark beard for the first time in 17 years, he announced a strong restructuring plan, stating he would “reexamine all services and businesses from scratch.”

The company atmosphere is unsettled as negative factors pile up on top of the already emergency management system. Kakao has experienced five consecutive quarters of declining performance through the third quarter of this year. New businesses and overseas mergers and acquisitions (M&A) initiatives, which were pursued as breakthroughs, have also been blocked. Among employees, there are even lamentations such as “How did Kakao end up like this?”

For the time being, the roles of the CA Council and external monitoring bodies are expected to grow. The CA Council, the group’s control tower, is led by Kim Jung-ho, head of Kakao’s management support, Song Ji-ho, CEO of Crust Universe, Jeong Shin-ah, CEO of Kakao Ventures, and Kwon Dae-yeol, head of Kakao Policy Center. The external monitoring body, the “Compliance and Trust Committee,” was formed on the same day. It consists of seven members, including Chairwoman Kim So-young, Kim Yong-jin, director of the Good Management Research Institute, and Ahn Soo-hyun, professor at Hankuk University of Foreign Studies Law School. The committee is composed of experts from law, academia, and industry, and holds strong authority, including the power to demand the immediate suspension of key decision-making bodies within the group.

This content was produced with the assistance of AI translation services.