The accusations against Kakao for manipulating SM Entertainment’s stock prices aren’t just a financial scandal. They’re a cautionary tale about ego, power, and the dangerous lengths people will go to stay in control. At the center of it all is a bitter family feud, a corporate takeover battle. The alleged stock rigging that prosecutors now call one of the largest market scandals in Korean entertainment history.
The Accusations
In February 2023, prosecutors say Kakao spent nearly 240 billion won (about $173 million) buying SM shares, more than 550 separate purchases, at prices deliberately above rival HYBE’s tender offer of 120,000 won per share. That buying spree inflated SM’s stock price, forced HYBE to withdraw its bid, and secured Kakao a 39.87% controlling stake by March 2023.
Now, Kakao founder Kim Beom-su, former CEO Hong Eun-taek, and former Kakao Entertainment chief Kim Sung-soo are facing charges of stock manipulation and violations of Korea’s capital markets laws. Prosecutors are demanding 15 years in prison for Kim, along with heavy fines for him, Kakao, and Kakao Entertainment. Kim insists he never ordered anything illegal, but prosecutors argue he personally approved the scheme.
How Did It Come to This?
To understand the scandal, you have to rewind to SM’s internal war. SM founder Lee Soo-Man was pushed out by his step-nephew and co-CEO Lee Sung-Soo in early 2023. Lee Sung-Soo accused his uncle of offshore tax evasion, shady self-dealing through a Hong Kong company, and even sabotaging aespa’s futuristic concept with forced “environmental” themes.
Lee Soo-Man responded by selling his shares to Bang Si-Hyuk’s HYBE, giving HYBE a shot at taking over SM. SM’s management, led by Lee Sung-Soo didn’t want HYBE in control. That’s when Kakao entered the picture, siding with SM’s board and allegedly using aggressive stock buying to keep HYBE out.
The Fallout
What started as a family feud snowballed into a corporate war and, ultimately, a criminal case. The damage has been brutal. Lee Sung-Soo’s gamble to oust his uncle backfired, triggering a mass exodus of artists, songwriters, and staff loyal to Lee Soo-Man.
SM Entertainment’s reputation has taken hit after hit. Critics and fans have slammed the company’s direction, music quality, and inability to match past chart dominance. Kakao’s image as a tech giant has been dragged into the mud. Most people unfamiliar with Korea’s tech industry only know the company for being one of Korea’s biggest stock manipulation scandals.
Even groups like aespa and RIIZE, who are still very successful, can’t fully distract from the shadow hanging over SM.
The SM–Kakao scandal isn’t just about K-pop. It’s about how unresolved rivalries, personal grudges, and unchecked corporate ambition can destabilize entire industries. Whether or not Kakao executives are convicted this fall, the reputational damage is done. SM and Kakao may never fully recover. The lesson here is when control becomes more important than creativity, everyone loses.
