Kakao Founder Facing Possible 15-Year Jail Sentence Over Stock Rigging Accusations

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In a high-stakes collision of K-pop capital and prestige, prosecutors are requesting prison time and a hefty fine for an alleged stock-rigging scheme operated by Kim Beom-su, the billionaire founder of one of South Korea’s largest and most influential technology and communications companies in Kakao.

The prosecution’s request for 15 years in jail and a fine of 500 million Korean won (approximately $359,600) stems from allegations that Kim Beom-su (also known as Brian Kim) and other Kakao associates manipulated stock to price out other bidders for a majority stakeholder control of SM Entertainment, the storied K-pop agency with three decades in the industry. Prosecutors claim that the inflated prices funneled roughly 240 billion Korean won ($172.6 million) of additional earnings, with Kim, Kakao’s chairman and largest shareholder, being the top beneficiary of the move. Kim was arrested in July 2024 and indicted the following month under charges framed under South Korea’s Capital Markets Act.

At Friday’s court case on August 29 in Seoul, prosecutors contended that Kim deliberately concealed Kakao’s intentions to block an offer from rival entertainment mammoth HYBE (the company behind BTS, SEVENTEEN, LE SSERAFIM, ENHYPEN and NewJeans) when HYBE offered a public tender price of 120,000 Korean won per share for control of SM Entertainment. Prosecutors accuse Kim of orchestrating on-market purchases to drive SM’s share price above HYBE’s public offer, with Kakao Corp and its subsidiaries ultimately becoming the majority stakeholder. The move added significant value to the company’s Kakao Entertainment division, which features a multi-label system that includes several other major K-pop companies.

Kim has denied the allegations. Reuters reports him saying in court, “Throughout my career, I have attended countless meetings, but not once have I ever approved anything illegal or considered it as part of our strategy.” Kakao Entertainment did not respond to a request for comment at press time.

Under the Capital Markets Act in Korea, crimes such as stock price manipulation are punished based on the perceived amount of unjust gains. Gains assessed at more than 30 billion won (about $21.6 million) result in prison sentences ranging from seven to 11 years. However, if the crime has a significant impact on stock prices, involves large-scale unfair trading, or is perceived as employing malicious methods, the sentence can be increased to up to 15 years, indicating that prosecutors regard the Kakao move as a serious crime.

Kakao Corp’s current CEO is Chung Shin-a, but Kim remains the largest shareholder of the conglomerate, holding a 24.12 percent stake, along with his affiliates.

What To Watch For Next In The Kakao Court Case

Court ruling: The Seoul court’s final decision will establish a legal precedent regarding the threshold between aggressive market strategy and criminal manipulation. While Kim is considered a refreshing competitor to the traditionally family-owned conglomerates in Korea, the ruling could ultimately impact Kim’s legacy, who Forbes currently cites as having a net worth of $5.1 billion to rank as the fourth richest in the country.

Industry merger & acquisition behavior: Global platforms and private equity watchers will be monitoring the case to see how future bids for Korean labels are structured and disclosed. With Korea’s entertainment and music industry becoming increasingly competitive and lucrative, such a high-profile can influence how power and equity are distributed across the market.

Kim’s health: Following his 2024 arrest and indictment, Kim was released on bail in October for health reasons with reports stating he is undergoing early-stage bladder cancer treatment. In March of this year, the 59-year-old stepped down from frontline management over these health concerns. Reuters noted that “Kim looked weaker than during his previous court appearance several months ago” in its on-the-ground coverage this past week.

Why the Kakao Case Matters to K-Pop

Kakao’s various operations permeate daily life for much of South Korea, spanning messaging, banking, gaming, shopping, ride services, and more. Kakao Entertainment is a subsidiary of the company that encompasses music labels, talent agencies, content publishing platforms, streaming services, and more. Kakao Ent’s group of music companies operates under a multi-label model, linking companies such as Starship Entertainment, IST Entertainment, High Up Entertainment, Antenna, and EDAM Entertainment under a single content umbrella. This approach generates cross-label synergies, providing additional leverage in accessing Kakao Corp’s multiple business avenues.

Kakao Entertainment also serves as a music distributor for various K-pop agencies, some of which may not be affiliated with the Kakao Ent umbrella, enabling labels’ music to reach both domestic and global audiences. In early 2021, K-pop fans raged when a licensing dispute between Kakao and Spotify allowed the music rights for releases by popular artists like Epik High, IU, ZICO, CL, HyunA, MAMAMOO, Monsta X, I-dle, Jessi and more to expire and disappear from the world’s most-used audio service. After fans, artists, and management teams cried out for a solution, the companies resolved their standoff after 10 days.

This summer, Kakao Corp responded to rumors that it was planning to sell Kakao Entertainment, now strengthened by its majority shareholder stake in SM, by sharing that the company had “discontinued the review” of potential shareholder changes. Instead, Kakao declared its commitment to exploring strategic options to expand the company’s global footprint. Case in point: Kakao and SM Entertainment partnered with British television production company Moon&Back Media to launch the U.K. boy band dearALICE (above) at the top of 2025.

2025 Kakao Entertainment Roster

• Antenna: You Hee-yeol, Jung Seung-hwan, Lee Jin-ah, Mijoo of Lovelyz, Lee Hyori, Cho Kyu-hyun; Toy, Peppertones, Dragon Pony and more
• EDAM Entertainment: IU and WOODZ
• High-Up Entertainment: STAYC and Black Eyed Pilseung
• IST Entertainment: VICTON, ATBO and Huening Bahiyyih of Kep1er
• Starship Entertainment: K.Will, Monsta X, Wonho, WJSN, Brother Su, CRAVITY, IVE, KiiiKiii, IDID and more

Bottom Line

Last year’s back-and-forth battle for majority control of SM Entertainment played out like a Korean drama with family conflicts, perceived professional backstabbing and previously untold stories leaking about major artists like aespa. A legal court case strips away the dramatics to better define what constitutes just behavior in business and market capitalization, particularly in a music-focused industry where many have an emotional attachment that extends beyond business numbers.

Kakao Corp’s stock only lost 1,000 Korean won ($0.72) this past Friday, August 29, down 1.57% for the day, and ending the week 2.95% in the red. Kakao’s stock is still up nearly 67% year-to-date, following a surge this summer.