Arrest warrants sought for Kakao employees in stock price manipulation case

The Prosecutors sought arrest warrants for three Kakao Corporation and Kakao Entertainment employees for stock price manipulation amid management rights disputes with SM Entertainment (SM).

On Friday, Korea's FSS Capital Market Judiciary Enforcement Unit sought arrest warrants from the Seoul Southern District Prosecutors' Office for three Kakao employees, including Chief Investment Officer Bae Jae-hyeon, and chief investment strategy directors for Kakao Corp and Kakao Entertainment.

The three individuals are charged with artificially inflating SM stock prices above the public offer prices of its rival, HYBE, by injecting approximately 240 billion Korean won to thwart the acquisition. Additionally, they are alleged to have violated the mandatory "5% rule" for reporting large stock holdings.

HYBE requested an FSS investigation into possible stock price manipulation while attempting to acquire SM. HYBE set a public offer price of 120,000 won per share, targeting a 25% share, but failed as SM's stock price exceeded the offer. The FSS has co-investigated, transferring the case to the Seoul Southern District Prosecutors' Office via a fast-track procedure. During the August investigation, Kakao Corp Founder and Chairman Kim Beom-su was subject to a search and seizure.


syeon@donga.com