Seoul Court Examines Kakao's Market Conduct: Tech Founder Faces Potential 15-Year Sentence in Stock Manipulation Case

The Kakao controversy represents far more than a corporate scandal—it’s a defining moment for how Korean law treats competitive market behavior in the entertainment sector. On August 29, prosecutors formally demanded a 15-year prison sentence and 500 million Korean won fine ($359,600) against Kim Beom-su, the tech mogul whose conglomerate dominates South Korea’s digital ecosystem from messaging to payments.

The Core Allegation: What Prosecutors Say Happened

At its foundation, the case revolves around who controls SM Entertainment, the three-decade-old K-pop powerhouse. When rival label HYBE launched a public tender offer at 120,000 Korean won per share, Kakao executives allegedly orchestrated coordinated share purchases to artificially inflate SM’s stock price, blocking HYBE’s bid and securing majority control for themselves.

Prosecutors argue this wasn’t mere aggressive competition—they contend it was deliberate market manipulation with measurable harm. The inflation generated approximately 240 billion Korean won ($172.6 million) in unjust gains, with Kim as the primary beneficiary. Arrested in July 2024 and indicted the following month, Kim maintains his innocence, telling the court: “Throughout my career, I have attended countless meetings, but not once have I ever approved anything illegal or considered it as part of our strategy.”

Why the Severity Matters: How Korean Securities Law Works

Under South Korea’s Capital Markets Act, stock price manipulation carries variable sentences tied to financial scope. Crimes involving gains exceeding 30 billion won typically draw seven to 11 years imprisonment. The prosecution’s request for 15 years signals they’re invoking an enhanced penalty clause—reserved for cases involving significant market impact, large-scale unfair trading, or what courts deem “malicious methodology.”

This distinction matters globally. The Seoul court’s ruling will establish whether Kakao’s actions constitute aggressive market strategy or criminal conduct, potentially reshaping how Korean corporations and foreign investors structure entertainment acquisitions.

Industry Implications: The Entertainment M&A Landscape

Kakao Entertainment operates through a multi-label structure encompassing Starship Entertainment, EDAM Entertainment (home to IU and WOODZ), High Up Entertainment (STAYC, Black Eyed Pilseung), IST Entertainment (hosting Huening Bahiyyih of Kep1er, VICTON, ATBO), and Antenna Records. This model creates cross-platform leverage—not just music distribution, but integrated access to Kakao Corp’s banking, shopping, and streaming infrastructure.

SM Entertainment’s majority control amplifies this advantage. For K-pop as an industry, the case signals that equity disputes won’t remain boardroom matters. Executives, shareholders, and private equity firms increasingly recognize that Korean entertainment consolidation carries regulatory teeth.

The stakes extend beyond one company. When Kakao faced selling rumors this summer, it reaffirmed commitment to Kakao Entertainment as a strategic anchor, partnering with Moon&Back Media to launch UK boy band dearALICE. Such investments suggest Kakao views entertainment not as a financial asset to liquidate, but as operational infrastructure for global expansion.

The Human Factor: Kim’s Position and Health Concerns

Kim Beom-su remains Kakao Corp’s largest shareholder with 24.12% ownership, though Chung Shin-a serves as current CEO. Forbes values his net worth at $5.1 billion, ranking him South Korea’s fourth richest person. Yet his trajectory faces uncertainty.

Following his 2024 arrest and indictment, Kim secured bail in October under health grounds. He’s undergoing early-stage bladder cancer treatment and stepped back from day-to-day management in March at age 59. Court observers noted he appeared visibly weaker during this month’s hearing, adding a personal dimension to Seoul’s legal proceedings.

Market Reaction and Timeline Ahead

Kakao Corp’s stock declined 1,000 Korean won ($0.72) on Friday, finishing down 1.57% for the day. Despite this setback, shares remain approximately 67% higher year-to-date following summer momentum.

The Seoul court must now weigh whether Kim orchestrated criminal conspiracy or exercised legitimate corporate prerogative. His legacy—once celebrated as a refreshing counter to Korea’s traditional family-controlled conglomerates—now hinges on judicial interpretation of market boundaries. The verdict will reverberate through K-pop financing, cross-border M&A structures, and how Korean law defines the line between ambition and illegality.