The billionaire founder of South Korean technology company Kakao, Kim Beom-su, was arrested on Tuesday on charges of stock market manipulation related to the company’s investment in one of its subsidiaries. the biggest K-pop in the country.
A battle of rank broke out at SM Entertainment early last year. Prosecutors accused Kakao of manipulating SM Entertainment’s stock price to prevent Hybe, the company behind BTS, from acquiring the agency, whose artist roster includes Girls’ Generation, NCT and Aespa.
Kakao eventually acquired a majority stake in SM Entertainment, in order to help it expand overseas by establishing the K-pop scene and tapping into South Korea’s cultural wave.
Last year, prosecutors indicted Kakao’s chief investment officer, Bae Jae-hyun, and the company itself on misappropriation charges. The South Seoul District Court confirmed that Mr. Kim, 58 and also accompanied by Brian, was arrested on Tuesday morning on similar suspicions.
Although Mr. Kim has not been formally charged, the court issued an arrest warrant to allow prosecutors to question him in custody, out of concern that he might destroy evidence or flee. , prosecutors say. Mr. Kim has denied the allegations.
Kakao said in a statement released last week that Mr. Kim told employees during a company meeting: “Those allegations are not true. I have never ordered or allowed any illegal activities.”
When a Kakao spokesperson was asked to comment on Mr. Kim’s arrest, he said “the current situation is not happy.
Mr. Kim is the first of the country’s newest generation of techies to face major criminal charges. Samsung’s third-generation leader, Lee Jae-yong, was sentenced to prison for bribery in 2021 before being released on parole that same year. Mr. Lee, who is now the conglomerate’s chief executive, was acquitted of various embezzlement charges earlier this year.
Kakao has struggled in recent years with regulatory scrutiny as its business has grown. The arrest affected the company’s shares, which fell more than 5 percent on Tuesday. The company has lost a third of its value this year.
Woochan Kim, a finance professor at Korea University’s Business School, said: “The arrest would be the biggest disaster for Kakao.” “It would be the job of those left in the company to show that it can function well even in the absence of the founder.”
He added that South Korean business culture discourages challenging authority, and boards of directors often do not serve as an effective check on managers.
Mr Kim, the founder of Kakao, was celebrated for rising from poverty to build one of South Korea’s leading technology companies. He was the first of his five siblings to attend college. He created a messaging app called KakaoTalk in 2010, which would become the foundation of his internet empire. At one point, he surpassed Mr. Lee as the richest person in South Korea, with a net worth of more than $13 billion, according to Bloomberg.
Kakao’s suite of apps serve as essential tools in South Korea, covering banking, payments, transportation, maps and games. KakaoTalk is installed on more than 90 percent of phones in the country. The company has about $12 billion in market value, in which Mr. Kim has a 24 percent stake.
But Kakao has declined in recent years, and with it, Mr. Kim’s net worth has dropped to $3.6 billion. In 2022, a fire at Kakao’s data center caused a multi-day nationwide shutdown, raising concerns about the one-party system and prompting South Korean President Yoon Suk Yeol ordering an investigation. Kakao’s chief executive resigned after taking over.
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