Second Instance Trial for Kakao’s Kim Beom-soo and SM in Stock Price Manipulation Case – Focus on Whether Intent to Manipulate Prices Was Established

The Criminal Division 4-1 of the Seoul High Court held the first pretrial hearing for the second instance of the case in which Kakao founder Kim Beom-soo and former Chief Investment Officer Bae Jae-hyun were indicted for manipulating SM’s stock price on March 20. The court identified whether the defendants had the intent to fix and stabilize prices, as well as whether their buying activities objectively constituted stock price manipulation, as the core issues to be resolved.

Founder Kim is accused of manipulating SM Entertainment’s stock price in February 2023 during the acquisition process to prevent rival HYBE from launching a tender offer. The tender offer price was 120,000 won per share. The prosecution claims that he, along with former CEO Bae Jae-hyun, manipulated the stock price by purchasing approximately 110 billion won worth of shares in over 300 transactions. The first instance trial concluded last October with a verdict of not guilty.

Kakao’s defense attorneys explained, “The stock price had already exceeded HYBE’s tender offer price before any purchases were made, and it was determined that the tender offer would fail. There was no discussion at all about purchasing shares specifically to block the tender offer at that time.”

The prosecution countered, “Terms such as ‘blocking the tender offer’ were used not only by the defendants and executives but also by the investment staff working under Bae Jae-hyun’s direction. This created a situation where the tender offer was forced to proceed through stock price manipulation.” The court stated, “The key issue in stock price manipulation cases is whether the intent to artificially shape prices can be established. If such an intent is proven, even a single transaction can be problematic.”

The court scheduled another pretrial hearing on May 8 and plans to hold up to four trial sessions thereafter before rendering a judgment. This accelerated timeline differs from the first instance and suggests that the second instance verdict is likely to be issued within the current year.