Prosecutors say first-instance court missed key evidence in Kim Beom-su appeal

Prosecutors argued Wednesday that the first-instance court failed to properly review a large body of evidence when it acquitted Kakao Future Initiative Center head Kim Beom-su of share price manipulation in connection with the acquisition of SM Entertainment.

Seoul High Court's Criminal Division 4-1 held the first hearing of the appeal trial Wednesday for Kim and Bae Jae-hyun, former head of investment at Kakao, along with other defendants facing charges of violating the Capital Markets Act.

Kim and the other defendants were indicted on charges of manipulating SM Entertainment's share price during the company's acquisition process in February 2023 — specifically, by keeping the share price above the tender offer price set by rival Hybe in order to derail Hybe's bid. The first-instance court acquitted Kim.

Prosecutors said Wednesday that "the first-instance court made no judgment on a large number of pieces of evidence." Challenging the lower court's finding that Kakao was not in a situation where it absolutely needed to acquire SM Entertainment, prosecutors said multiple pieces of evidence confirmed both the necessity of the acquisition and Kakao's determination to proceed.

Prosecutors also contested the lower court's rejection of testimony from Lee Jun-ho, former head of investment strategy at Kakao Entertainment, arguing that statements from some defendants and documentary evidence — including KakaoTalk messages — were consistent with what Lee had said.

Prosecutors further warned that if the lower court's ruling were upheld, it could weaken the legal standard for evaluating attempts to block a tender offer through open-market purchases.

Prosecutors also requested that Bang Si-hyuk, chairman of Hybe, be called as a witness. Bang had been designated as a witness in the first trial but did not appear, citing a business trip to the United States. The court said it would decide whether to accept the witness request after hearing arguments from the defense on July 22.

Meanwhile, the first-instance court had acquitted Kim, Bae, Kakao Corp. and Kakao Entertainment on all charges. The court found that while Kakao had considered acquiring management control of SM Entertainment, it was difficult to conclude that the acquisition was an absolute necessity, and that the evidence submitted was insufficient to establish that a conspiracy to manipulate the share price had taken place.