A billionaire and tech leader from South Korea was taken into custody on Tuesday amid allegations of stock manipulation involving a major K-pop agency. Kim Beom-su, the founder of the technology giant Kakao, has not yet faced formal charges, as reported by the New York Times. The arrest followed the issuance of a warrant by the Seoul Southern District Court, with prosecutors expressing concerns that Kim could flee the country or attempt to destroy evidence.
In a recent meeting, Kim firmly denied the allegations, asserting, “The allegations are not true. I have never instructed or condoned any illegal acts.” Kakao expressed regret over the arrest, labeling it “unfortunate.”
The charges stem from accusations that Kim manipulated the stock of SM Entertainment to sabotage a takeover attempt by rival K-pop agency Hybe last year. Both SM Entertainment and Hybe are major players in the K-pop industry, representing popular groups such as Aespa and BTS, respectively. Ultimately, Kakao succeeded in acquiring SM Entertainment, but not without controversy; last year, Kakao’s chief investment officer, Bae Jae-hyun, was also indicted for stock manipulation.
Kim, 58, launched Kakao in 2010 and held approximately a 24% stake in the company, which employed over 10,000 staff members as of 2020. At one time, he was recognized as South Korea’s wealthiest individual, with an estimated net worth exceeding $13 billion. Following the news of his arrest, Kakao’s stock experienced a drop of 5%.
According to Woochan Kim, a professor at Korea University Business School, the incident may pose the “biggest crisis” for Kakao. He emphasized that it is now crucial for the company to demonstrate its resilience and ability to thrive without its founder at the helm.
This situation emphasizes the ongoing challenges in corporate governance within fast-growing industries like tech and entertainment, particularly in high-stakes markets such as K-pop. As Kakao navigates this crisis, it holds an opportunity to strengthen its internal processes and assure stakeholders of its integrity and stability, potentially emerging stronger on the other side.
In summary, while these developments raise serious issues for Kim and Kakao, the company’s future will largely depend on how it manages this crisis and maintains its operational integrity.