[Alpha Biz=(Chicago) Reporter Kim Jisun] Authorities investigating SM Entertainment's stock price manipulation case have handed over Kakao corporation and management to the prosecution.

According to the Financial Supervisory Service's announcement on the 27th, the FSS capital market special judicial police sent Bae Jae-hyun, CEO of Kakao, who is accused of price manipulation (violation of the Capital Market Act), Kang Ho-joong, head of Kakao's investment strategy office, and Lee Joon-ho, head of Kakao Entertainment's investment strategy division, to the prosecution. Kakao and Kakao Entertainment were also handed over to the prosecution by applying joint punishment regulations under the Capital Markets Act.

The management is suspected of raising stock prices by investing 240 billion won in the bid to disrupt the public purchase of rival HYBE in the acquisition of SM Entertainment in February. According to the investigation, they colluded with private equity fund operator One Asia Apartment Partners to mobilize typical market manipulation techniques.

The Financial Supervisory Service said, "Kakao management was advised on criminal methods or methods of concealment through law firms." It was also said that there was no usual internal control at all, with Kakao Group's purchase of SM Entertainment shares carried out through unofficial decision-making procedures. This is why the Financial Supervisory Service applied the joint punishment rule, judging that there was not enough caution and supervision at the corporate level.

Kim Bum-soo, founder of Kakao and head of the Future Initiative Center, is also expected to be handed over to the prosecution for the same charges.

As Kakao was handed over to the prosecution, the possibility of the sale of Kakao Bank also increased. If Kakao's fine is finalized by the court after the prosecution's indictment, Kakao will be disqualified as a major shareholder and will have to sell only 10% of its 27.17% stake in Kakao Bank. For Kakao Group, as Kakao Bank is a key financial affiliate, the growth potential of the group as a whole is expected to have a significant impact. Financial authorities also plan to push for administrative sanctions on Kakao Group for violating its obligation to disclose the "5% rule."

Kakao only said, "We have no position to reveal yet," about the FSS' decision.

 

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