Kakao Corp. founder Kim Beom-soo was acquitted on Tuesday of stock manipulation charges related to the company’s high-profile 2023 acquisition of SM Entertainment Co., a ruling that lifts a major legal burden off the South Korean internet giant as it seeks to accelerate corporate restructuring and reposition itself as an AI-driven platform company.
The Seoul Southern District Court found Kim, former Kakao Investment Chief Bae Jae-hyun and two corporate entities – Kakao and Kakao Entertainment Corp. – not guilty of violating Korea’s Capital Markets Act.
Prosecutors had accused them of rigging SM shares in early 2023 to block a rival takeover bid by HYBE Co., the agency behind BTS.
Kim, also known as Brian Kim, was indicted for the charge last August, while Bae and two other executives were arrested under investigation for the allegation in October 2023.
The court said the prosecution failed to prove intent to manipulate prices, noting that Kakao’s stock purchases did not constitute “artificial price fixing” and differed in timing and method from typical market-rigging behavior.
It also questioned the credibility of a key prosecution witness, a former Kakao Entertainment executive, citing possible external pressure during questioning.
Speaking outside the courthouse, Kim said he was grateful for “the court’s careful review of the case,” adding that he hoped the verdict would help Kakao “move out from under the shadow of stock manipulation allegations.”
During the investigation, Kim has flatly denied the suspicions.
KAKAO PLEDGES RENEWAL AFTER A 2-YEAR TRIAL
The acquittal has removed one of the biggest legal risks facing Kakao, which has been mired in controversy over management practices and governance since its rapid expansion into entertainment, fintech and mobility.
It is expected to give fresh momentum to the group’s ongoing management overhaul, launched by Kim since his return to the company’s management in late 2023 to streamline decision-making and refocus growth around artificial intelligence and platform synergies.
Kakao said the group had endured “numerous challenges” throughout the nearly three-year probe and court proceedings.
“It was especially painful that we were unable to respond swiftly to rapid market changes. We will work harder to make up for that and fulfill our social responsibilities,” said the company in a statement after the court’s decision.
Prosecutors said they will review the court’s decision before deciding whether to appeal.
AI DRIVE WILL ACCELERATE
The acquittal comes months after Kim, who had been at the center of the company’s reform drive, stepped down as chairman of Kakao’s top decision-making body in March, saying he would withdraw from day-to-day management to focus on long-term strategy.
His resignation followed growing pressure for accountability amid a series of governance issues and underperforming units. He also needed to focus on his health after being diagnosed with early-stage bladder cancer.
Under his direction, Kakao began consolidating affiliates, cutting their number to 116 from 147 within a year and restructuring the group’s sprawling business lines to prioritize profitability and technological competitiveness.
Although Kim will no longer hold any formal management title, he remains head of Kakao’s Future Initiative Center, tasked with shaping the company’s long-term innovation strategy.
His acquittal is expected to stabilize leadership and improve morale within the group, which has faced investor skepticism amid its ongoing trials and sliding stock price, said market analysts.
The verdict will likely allow Kakao to focus more fully on AI services, content and platform integration – a shift seen as crucial to restoring growth and investor trust in one of Korea’s most prominent digital conglomerates.
Kakao shares closed up 6% at 62,300 won ($43.64) on Tuesday.
By Hee-Won Chung
tophee@hankyung.com
Sookyung Seo edited this article.
