Kakao Founder Arrested on Stock Manipulation Charges
Kim Beom-su, the billionaire founder of South Korean tech giant Kakao Corp, was arrested on Tuesday over allegations of manipulating stocks during the acquisition of a K-Pop agency last year. The arrest marks a significant legal development for Kakao, which runs South Korea’s largest chat app and has faced legal challenges related to the same acquisition.
Kim, also known as Brian Kim, has been a prominent figure in South Korea’s digital industry, building Kakao’s group of affiliates, valued at 86 trillion won ($62 billion) by assets, since launching the chat app in 2010. The accusations against him involve manipulating the stock price of SM Entertainment in February last year to prevent a competitor, Hybe, from acquiring it.
Kim has denied the allegations, asserting that he neither ordered nor tolerated any illegal activity. Although he has not been formally charged, his arrest could have significant implications for Kakao’s investments in artificial intelligence and its overseas expansion plans. The Seoul Southern District Court approved the arrest warrant to prevent potential destruction of evidence and because Kim was considered a flight risk.
Kim is currently held at the Seoul Nambu Detention Centre. Prosecutors will have up to 20 days to investigate further before deciding whether to indict him. If convicted, Kim’s case could impact Kakao group’s control of its online banking arm, KakaoBank Corp, as South Korean financial regulations restrict those convicted of financial crimes from owning more than a 10% stake in a bank.
The arrest is also expected to bring increased regulatory scrutiny on Kakao, potentially complicating the company’s major investment decisions in AI and its international business ventures. Kakao plans to introduce new AI services this year. Following the news, Kakao Corp shares dropped 3.4% in morning trading, reaching their lowest point since November, and have fallen 24% year-to-date.
