More Drama in the K-Pop World: South Korean Prosecutors Seek Arrest Warrant for Kakao Founder on Stock-Manipulation Charges

Seoul, South Korea. Photo Credit: Ryan Kim

More drama is unfolding in the K-pop space, as South Korean prosecutors are officially seeking an arrest warrant for Kakao founder Kim Beom-su on stock-manipulation charges.

Regional media including Yonhap just recently shed light on the development, with the sought arrest warrant stemming specifically from the takeover of SM Entertainment last year. We followed the underlying confrontation, which saw BTS agency Hybe unsuccessfully attempt to take an ownership stake in the K-pop rival, in detail last year.

Though it perhaps goes without saying in light of today’s news, the episode hasn’t concluded. As things stand, Kakao holds a controlling interest in SM, the professional home of Aespa, Exo, Red Velvet, and more. (Saudi Arabia’s Public Investment Fund in 2023 invested hundreds of millions of dollars in Kakao Entertainment, which itself possesses a sizable piece of SM.)

But as covered by DMN Pro four months back, Kakao chief investment officer Bae Jae-hyun was indicted on similar stock-manipulation charges in November of 2023. That same month, South Korean media indicated that separate charges were forthcoming for execs including Kim Beom-su.

Consequently, while today’s news isn’t exactly a surprise, it does reflect the multiple high-stakes situations in the K-pop arena. Due to geographic considerations, the language barrier, and other reasons, these situations receive relatively little stateside coverage despite K-pop’s growing international significance.

Also as covered by DMN Pro, YG Entertainment’s founder was in November of 2023 slapped with a six-month prison sentence, suspended for one year, for allegedly interfering with a witness in a drug investigation.

Returning to the arrest warrant for Kim Beom-su, Yonhap has made clear that prosecutors are zeroing in on alleged crimes surrounding the approximately $174 million in SM stock that Kakao scooped up – allegedly at an artificially inflated price – amid the aforesaid takeover battle.

Running with supplemental coverage from the Korea Herald, the exec was grilled by prosecutors for five hours last week and is accused of violating the Financial Investment Services and Capital Markets Act.

In a statement, Kim Beom-su’s legal team denied the claims, defending the takeover as “a legitimate stock purchase on the market.”

“We express our regret over the prosecution’s decision to file an arrest warrant,” the attorneys communicated, per the Herald. “Kim has never ordered nor tolerated any forms of illegal actions tied to the purchase of shares in SM Entertainment. It was a legitimate stock purchase on the market in a bid to expand the company portfolio.”

Elsewhere in the K-pop arena, Hybe remains embroiled in a much-publicized dispute – and now a defamation lawsuit – with its Ador subsidiary and the head thereof, Min Hee-Jin. And from a commercial perspective, the Korea Herald has described its less-than-optimistic outlook for the future of Katseye, the international K-pop girl group developed by Hybe and Geffen.

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