A prominent South Korean billionaire and technology entrepreneur was arrested on Tuesday for allegedly engaging in stock price manipulation involving a significant K-pop agency during a deal that took place last year.
Kim Beom-su, the founder of Kakao, has not yet been formally charged, as reported by the New York Times. An arrest warrant was issued by the Seoul Southern District Court to ensure his custody, with prosecutors expressing concerns that he might attempt to flee the country or destroy evidence.
In a staff meeting at Kakao last week, Kim denied the allegations, stating, “The allegations are not true. I have never instructed or condoned any illegal acts.” Kakao described the arrest as “unfortunate.”
Kim, who is 58 years old, is accused of manipulating the stock of SM Entertainment during a takeover attempt last year in a bid to obstruct another major K-pop agency, Hybe, from acquiring it.
Both SM Entertainment and Hybe are among South Korea’s leading K-pop firms, representing popular groups such as Aespa and BTS respectively.
Kakao ultimately succeeded in acquiring SM Entertainment. Additionally, last year, Kakao’s chief investment officer, Bae Jae-hyun, faced indictment on similar stock manipulation charges.
Kim established Kakao in 2010, with its headquarters located in Jeju City. He holds approximately a 24% stake in the company, which employed over 10,000 individuals in 2020. At one time, Kim was recognized as South Korea’s wealthiest individual, with an estimated net worth exceeding $13 billion.
Following the announcement of his arrest, shares of Kakao fell by 5% on Tuesday.
Woochan Kim, a professor at Korea University Business School, remarked that this could represent Kakao’s “biggest crisis.” He added that it would now be up to the remaining leadership at the company to demonstrate its capability to function effectively even in the absence of its founder.