South Korean Prosecutors Seek 15-Year Prison Sentence for Kakao Founder in SM Entertainment Takeover Case

South Korean prosecutors are pursing a 15-year prison sentence for Kim Beom-su, founder of Kakao Corporation, in connection with the company’s high-profile takeover of SM Entertainment. The charges stem from allegations of stock price manipulation during a complex bidding war that pitted Kakao against HYBE.

During a hearing at the Seoul Southern District Court, prosecutors accused Kim Beom-su of orchestrating manipulative trading practices to influence SM Entertainment’s share price in February 2023. Prosecutors requested both the lengthy prison sentence and a fine of 500 million won ($360,000), contending that Kim directed Kakao Group executives to intervene in the stock market directly.

Prosecutors argue that Kim as the head of Kakao Group was the ultimate decision-maker, choosing to continue to oppose lawful competitive methods and was the “ultimate beneficiary of the criminal proceeds.” Kim was arrested in July 2024 and indicted in August of the same year, though he was released on bail in October following health concerns due to bladder cancer.

In March 2025, Kim stepped down from Kakao’s top decision-making council, but he remains the company’s largest shareholder. He holds 24.12% of shares jointly with affiliates. According to South Korean law, violations of the Capital Markets Act—including stock price manipulation—introduces sentences tied to the scale and impact of the crime.

Prosecutors highlight that when unjust gains exceed 30 billion won ($21.5M), baseline imprisonment ranges from seven to eleven years. That sentence can escalate to 15 years if the crime uses ‘malicious methods’ or significantly distorts market prices. The court has yet to issue a final ruling, but the prosecution’s request signals a strong stance against market abuses in high-stakes K-pop industry transactions.

Meanwhile, the HYBE Corporation remains under intense legal scrutiny. Recent reports confirm that police raided HYBE’s Seoul headquarters as part of a broader probe into alleged fraudulent trading and insider dealing by founder Bang Si-hyuk. Authorities are investigating alleged secret side deals ahead of Hybe’s IPO, which may have resulted in upwards of $300M in gains for Bang Si-hyuk.

Two concurrent investigations are currently underway; one conducted by the Seoul police and the other by South Korea’s competition watchdog. The crackdown follows suspended sentences for three former HYBE employees convicted of insider trading tied to BTS’ 2022 hiatus.