SEOUL — The legal battle surrounding the alleged stock market manipulation of SM Entertainment has entered its second chapter. On Friday, the Seoul High Court held its first preparatory hearing for the appellate trial of Brian Kim (Kim Beom-su), the founder of South Korean tech giant Kakao, who was previously acquitted of charges in the lower court.

The Core of the Dispute
The case centers on events in February 2023, during a high-stakes bidding war for SM Entertainment. Prosecutors allege that Kim and other Kakao executives conspired to inflate SM Entertainment’s stock price to obstruct a hostile takeover bid by rival agency HYBE, the label behind BTS.

According to the prosecution, Kakao allegedly injected approximately 240 billion won to buy SM shares, deliberately pushing the price above HYBE’s public tender offer of 120,000 won per share, ultimately forcing HYBE to withdraw its bid.

Arguments from Both Sides
During the preparatory hearing held by the Seoul High Court's Criminal Division 4-1, the legal representatives for Kim and Kakao maintained a firm stance of innocence:

Defense Argument: The defense team argued that there was no "intent" to manipulate the market. They claimed the stock purchases were legitimate business transactions aimed at securing a foothold in the company (foothold purchasing) rather than an organized effort to sabotage HYBE. "There was no discussion of buying shares specifically to block the public tender offer," the defense stated.
Prosecution Argument: Contrarily, the prosecution asserted that internal communications between Kakao executives and investment teams explicitly used language indicating a goal to "deter the public tender." They argue that the sheer scale and timing of the trades constitute an artificial interference with market forces.

Legal Framework and Key Issues
The presiding judge, Kim In-gyeom, outlined three critical points that the appellate court will examine:

Subjective Intent: Did the defendants have the specific purpose of stabilizing or manipulating the stock price?
Scope of the Law: If the trades were intended to stabilize the price, does that constitute a violation of the Capital Markets Act even if the methods weren't "artificially" deceptive?
Objective Patterns: Do the actual patterns of the stock purchases, objectively viewed, align with the legal definition of market manipulation?
 
What’s Next?
As this was a preparatory hearing, the defendants—including Kim and former Kakao Chief Investment Officer Bae Jae-hyun—were not required to attend. The court has scheduled a second preparatory hearing for May 8, 2026. Following that, the court plans to hold four formal trial sessions to reach a final verdict.

The outcome of this case remains a "Sword of Damocles" for Kakao. Under South Korean law, if the legal entity (Kakao Corp) is convicted of a financial crime, it could be forced to divest its majority stake in KakaoBank, as the law prohibits major shareholders of internet banks from having a criminal record related to financial regulations.