Kakao Pay, the online payment unit of South Korean tech giant Kakao, has axed plans to expand its ownership of stocks of US brokerage firm Siebert Financial amid ongoing regulatory risks at Kakao.

The tech firm said in a public disclosure Wednesday it has arrived at a mutual consensus with Siebert to end their agreement to purchase a second round of stocks in the company, which had been slated to happen next year.

Kakao Pay in May purchased a 19.9 percent stake in the New York-based firm through an initial deal and was set to buy an additional 31.1 percent stake next year, eventually gaining a 51 percent majority stake in Siebert.

In a separate statement released Tuesday, Siebert Financial said the two parties have terminated the 103.9 billion won ($79.85 million) deal after reaching a compromise over a disagreement regarding "purchaser material adverse effect."

"Material adverse effect" refers to a change that could bring a significant negative effect on a business and impact a deal's closing.

The announcement comes after Siebert last month notified Kakao Pay that it had determined it would be difficult to execute their secondary deal, owing to the occurrence of a "significant adverse effect," while making a filing at the US Securities and Exchange Commission explaining that the South Korean authorities were "taking action" against Kakao and Kakao Pay in regards to that adverse effect.

Siebert made the move as Kakao continues to be plagued by regulatory issues, including alleged stock manipulation in connection with its acquisition of K-pop agency SM Entertainment. In November, the company's chief investment officer was indicted, while several other chief executives, including Kakao founder Kim Beom-su, face questioning in regards to the allegation.

In a statement to the press Wednesday, Kakao Pay said Siebert will pay a $5 million settlement to the South Korean firm between March 29, 2024, and June 20, 2026, as the stock acquisition agreement has been terminated, and the contracts between the shareholders changed, due to the suspension of the second purchase deal.

Kakao Pay will continue to own the 8.1 million shares of Siebert common stock that it purchased in May and retain its rights to designate one director to the latter's board of directors. In June, Kakao Pay Vice President Shin Ho-cheol was appointed a board member of the US brokerage firm.