Early Tuesday, the founder of South Korea’s internet giant Kakao was arrested, according to a Seoul court. He faces accusations of stock manipulation during the acquisition of SM Entertainment, a prominent K-pop company.
Kakao, founded in 2010, has become a major player in various industries, including banking, ride-hailing, and messaging. KakaoTalk, its messaging app, is used by 90 percent of South Korean smartphone owners. The company also has a significant presence in the entertainment industry, having acquired a controlling stake of nearly 40 percent in SM Entertainment last year.
Prosecutors allege that Kakao spent 240 billion won ($173 million) on SM shares in early 2023 at inflated prices. This move was reportedly intended to block a takeover attempt by HYBE, the agency behind BTS. HYBE had initially bought a 14.8 percent stake in SM from its founder and offered to buy more shares, but withdrew after SM’s stock prices surged.
The Seoul Southern District Court issued an arrest warrant for Kim Beom-su, Kakao’s founder, citing concerns about him fleeing or destroying evidence. Other Kakao executives have also been questioned.
In a recent emergency meeting, Kim expressed regret over the situation, emphasizing the company’s ongoing efforts to innovate with AI technology. He has denied the charges, insisting that he never engaged in or condoned illegal activities.
Experts warn that Kim’s detention could pose significant challenges for Kakao. Choi Kyoung-jin, a law professor at Gachon University, highlighted the potential impact on the company’s AI initiatives and the need for Kakao to address overall and judicial risks. Reorganizing its governance will be crucial for the company moving forward.
