The investigation into allegations of stock manipulation surrounding Kakao Corporation and its acquisition of SM Entertainment has intensified. Prosecutors have conducted a mandatory search at Kakao's Pangyo office, seeking evidence related to the case.

Earlier, the Financial Supervisory Service (FSS) had recommended the indictment of several key figures in the case, including Kakao founder Kim Beom Su, Kakao CEO Hong Eun Taek, Kakao Entertainment co-CEOs Lee Jin Soo and Kim Sung Soo, as well as lawyers who provided legal counsel.

The investigation centers around suspicions of inflating the share prices of SM Entertainment, a major K-pop management firm, in an attempt to thwart a takeover bid earlier this year by HYBE, the parent company of BTS' management agency, BigHit.

It is alleged that Kakao collaborated with a private equity fund operator to inject approximately 240 billion won (about 185 million U.S. dollars) into the market, surpassing the 120,000 won per share offered by HYBE to small shareholders. Ultimately, HYBE halted the bid, allowing Kakao and its subsidiary to jointly secure nearly a 40% stake in SM, thus gaining management control.

Additionally, Kakao is facing accusations of failing to fulfill the compulsory declaration regarding their stock acquisition.