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FSS Seeks Arrest Warrants for Kakao Staff Amid SM Stock Probe

The Financial Supervisory Service (FSS) has taken a significant step in the ongoing investigation into the alleged stock price manipulation of SM Entertainment. Arrest warrants have been requested for three key employees of Kakao and its subsidiary, Kakao Entertainment.

The Capital Market Special Judicial Police, a division of the FSS, announced their intention to seek the arrest of three individuals, including Bae Jae-hyun, the head of Kakao’s investment division. This action is based on charges related to violations of the Capital Market Act, specifically allegations of stock price manipulation. The Seoul Southern District Prosecutors’ Office also requested warrants for Bae Jae-hyun and the heads of investment strategy of Kakao and Kakao Entertainment.

Historically, arrest warrants in such cases indicate a belief that the suspect might be a danger to the community or a potential flight risk. A notable instance from the past is the 2002 case of Lee Soo-man, who fled South Korea after accusations of embezzlement and tax evasion. The president pardoned him in 2007 after finding him guilty.

The Kakao execs’ representatives respond

The crux of the current investigation revolves around suspicions that these individuals spent a staggering 240 billion KRW to inflate SM Entertainment’s stock prices artificially. This purported manipulation aimed to surpass the public purchase price offered by HYBE, a rival in the bid for SM Entertainment’s management rights. The Special Judicial Police also highlighted that the suspects failed to report their significant stock holdings in SM Entertainment.

The accused’s legal representatives countered these allegations. They stated, “The stock purchases were legitimate efforts to secure a stake in SM Entertainment during the competitive bid against HYBE. There was no manipulation of stock prices.” They also expressed regret over the arrest warrant requests, emphasizing that no harm was done to any stakeholders, including minor shareholders of both HYBE and SM Entertainment. They vowed to clarify all charges in court.

Earlier this year, a dispute arose between HYBE and Kakao over the acquisition of SM Entertainment. HYBE had raised concerns about irregular purchasing activities and sought an investigation from the FSS. While Kakao eventually emerged as SM’s largest shareholder, suspicions of stock price manipulation and other legal violations persisted, leading to the ongoing investigation. – K-Pop News Writer

Featured Image: The FSS is on the warpath against Kakao. Source: The Korea Times.

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