## Kakao Founder Faces Up to 15-Year Prison Term in High-Profile Stock Manipulation Case

South Korea's legal system is preparing to deliver a landmark ruling on what constitutes criminal market manipulation versus aggressive business strategy. Kim Beom-su, the billionaire founder and largest shareholder of Kakao Corp, stands at the center of this defining moment, with prosecutors demanding a 15-year prison sentence and 500 million won fine ($359,600) for alleged stock rigging in the 2023 battle over SM Entertainment's control.

## The Core Allegations: How the Scheme Allegedly Unfolded

The legal team claims Kim orchestrated a coordinated campaign where Kakao Corp and its subsidiaries artificially inflated SM Entertainment's share price to block HYBE's public tender offer of 120,000 Korean won per share. Rather than allowing the traditional bidding process to proceed naturally, Kakao allegedly conducted strategic on-market purchases designed to price out competitors. The prosecution estimates this maneuver generated roughly 240 billion Korean won ($172.6 million) in unjust gains, with Kim as the primary beneficiary through his 24.12 percent stake in the conglomerate.

Kim, arrested in July 2024 and indicted the following month, maintains his innocence. In court proceedings on August 29 in Seoul, he stated: "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 Prosecutors Are Pushing for Maximum Penalties

Under South Korea's Capital Markets Act, stock manipulation convictions carry prison terms scaled to the magnitude of illicit gains. Unlawful profits exceeding 30 billion won typically result in seven to 11-year sentences. However, prosecutors argue this case warrants the maximum 15-year penalty because the conduct involved large-scale unfair trading, significant stock price impact, and what they characterize as malicious methodology—criteria the law identifies for enhanced punishment.

This legal framework positions the Kakao case as far more serious than routine market violations. The prosecution's aggressive sentencing request signals they view the actions as a systematic scheme rather than isolated infractions.

## What's at Stake: Three Critical Outcomes to Monitor

**The precedent:** Seoul's verdict will define the boundary between competitive market tactics and criminal manipulation for Korea's tech and entertainment sectors. A conviction strengthens regulatory enforcement; an acquittal could embolden similar strategies among other conglomerates.

**Entertainment sector M&A transformation:** Global investors and entertainment companies are watching closely. How Korean labels structure future bids, disclose shareholder intentions, and navigate competitive offers will likely shift based on this ruling. The K-pop industry's explosive growth has attracted massive investment, making acquisition disputes increasingly common.

**Kim's personal trajectory:** The 59-year-old—currently ranked South Korea's fourth richest person with a $5.1 billion net worth—faces potential reputational collapse. Though released on bail in October 2024 for health reasons (undergoing early-stage bladder cancer treatment), Kim's legacy hangs in the balance. Recent court appearances showed physical deterioration, raising questions about his ability to withstand prolonged legal proceedings.

## Kakao's Entertainment Empire and Why SM Entertainment Matters

Kakao Corp's daily penetration into South Korean life spans messaging, banking, gaming, shopping, and ride services. Kakao Entertainment, the subsidiary at the heart of this controversy, operates a sprawling multi-label system encompassing Starship Entertainment, IST Entertainment, High Up Entertainment, Antenna, EDAM Entertainment, and more.

The company distributes K-pop music globally, creating cross-label synergies that provide leverage across Kakao's ecosystem. The roster includes major artists like IU (Lee Hyori's peer in the K-pop establishment), Monsta X, IVE, WJSN, CRAVITY, and many others. Lee Hyori, the legendary singer, remains part of Antenna's roster, representing the label's strength in recruiting established talent.

Acquiring majority control of SM Entertainment—home to groups like aespa and a three-decade legacy—dramatically expanded Kakao Entertainment's market position. However, the method allegedly used to secure that control now threatens to unravel the strategic victory.

## The 2021 Licensing Crisis: A Glimpse at Kakao's Market Power

A precedent illuminates why regulators scrutinize Kakao's business conduct. In early 2021, a licensing dispute between Kakao and Spotify caused music from artists including Epik High, IU, ZICO, CL, HyunA, MAMAMOO, Monsta X, I-DLE, and Jessi to vanish from the world's largest audio platform. After 10 days of industry chaos and fan outrage, the standoff resolved. The incident demonstrated Kakao's capacity to disrupt global music distribution—and the stakes when such power is wielded.

## Current Kakao Entertainment Roster (2025)

**Antenna:** You Hee-yeol, Jung Seung-hwan, Lee Jin-ah, Mijoo of Lovelyz, Lee Hyori, Cho Kyu-hyun; Toy, Peppertones, Dragon Pony and more

**EDAM Entertainment:** IU and WOODZ

**High-Up Entertainment:** STAYC and Black Eyed Pilseung

**IST Entertainment:** VICTON, ATBO and Huening Bahiyyih of Kep1er

**Starship Entertainment:** K.Will, Monsta X, Wonho, WJSN, Brother Su, CRAVITY, IVE, KiiiKiii, IDID and more

Beyond Korean releases, Kakao partnered with British production company Moon&Back Media to launch the U.K. boy band dearALICE in early 2025—signaling continued global expansion despite legal headwinds.

## Market Reaction and Looking Ahead

Kakao Corp's stock dipped 1,000 won ($0.72) on Friday, August 29—a 1.57% decline for the day, closing the week 2.95% lower. Despite the court setback, the stock remains up approximately 67% year-to-date following a summer rally, suggesting investor confidence in the company's fundamental operations remains intact.

The SM Entertainment acquisition battle played out as a corporate drama rivaling K-drama storylines, complete with professional rivalries, strategic leaks, and emotional investment from fans whose favorite artists hung in the balance. The legal case now strips away narrative flourish to address a fundamental question: where does aggressive capitalism end and criminal conduct begin in a market as emotionally charged as K-pop?