Kakao founder, executives referred to prosecution for stock manipulation

Kakao founder Kim Beom-su, along with other executives, has been referred to prosecution for allegedly manipulating SM Entertainment's stock prices.

Kakao founder Kim Beom-su [NEWS1]

Kakao founder Kim Beom-su was referred to the prosecution by the financial regulator on Wednesday evening for allegedly manipulating the stock prices of K-pop agency SM Entertainment in its attempt to take over the company against entertainment company HYBE.

Kim and five other Kakao and Kakao Entertainment executives, and attorneys who represent the company, were referred to the prosecution for further investigation.

On Monday evening, Kakao and Kakao’s Chief Investment Officer (CIO) Bae Jae-hyun were indicted under the same allegations.

Bae and two other executives from Kakao and Kakao Entertainment are accused of manipulating SM Entertainment shares by injecting some 240 billion won ($184.4 million), above the open market purchase price suggested by HYBE.

Prosecutors reported that Bae and two other executives manipulated the stock price 409 times on Feb. 16, 17, 27 and 28. They also alleged that Kakao did not report the stock purchases to the Financial Supervisory Service (FSS).

The Capital Markets Act states that when a person acquires more than 5 percent of the total number of listed stocks, they need to report the purchase to the financial regulator within five working days.

Kim was summoned for questioning by the FSS for nearly 16 hours regarding his involvement in the matter.

Through the tender offer in March, Kakao and Kakao Entertainment became the largest shareholder of SM Entertainment with a combined holding of 39.87 percent.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]