A South Korean billionaire and tech entrepreneur, Kim Beom-su, was arrested on Tuesday amid allegations of stock manipulation concerning a significant K-pop agency. The founder of Kakao, Mr. Kim has not yet been formally charged, as per reports from the New York Times. The Seoul Southern District Court has issued an arrest warrant for him, driven by concerns that he may attempt to flee the country or destroy evidence.
In response to these allegations, Kim, in a recent staff meeting at Kakao, asserted his innocence, stating, “The allegations are not true. I have never instructed or condoned any illegal acts.” Kakao described the arrest as “unfortunate.”
The stock manipulation accusations revolve around a takeover of SM Entertainment, a prominent player in the K-pop industry, last year. The allegations suggest that Kim engaged in actions to thwart a competing acquisition attempt by Hybe, another leading K-pop agency. Kakao eventually succeeded in acquiring SM Entertainment. Notably, last year, Kakao’s chief investment officer, Bae Jae-hyun, was also indicted on charges relating to stock manipulation.
Kim, 58, who founded Kakao in 2010 and holds approximately a 24% stake in the company, was once recognized as South Korea’s richest individual, with a reported net worth exceeding $13 billion. Following news of his arrest, Kakao’s stock experienced a decline of 5% on the stock market.
Korea University Business School professor Woochan Kim noted that this situation could represent “Kakao’s biggest crisis” and emphasized the importance for the remaining team to demonstrate effective management in Kim’s absence.
Despite the current challenges, this situation could serve as a moment for Kakao to reflect on its governance and compliance strategies, potentially reinforcing its practices to avert similar crises in the future.
In summary, while Kim Beom-su’s arrest poses significant challenges for both him and Kakao, it also presents an opportunity for the company to strengthen its internal structures and regain public confidence.