South Korean authorities have arrested Kakao Corp. founder Brian Kim on charges of market manipulation, sparking a Internet entrepreneur The country’s most famous businessman for many years was sent to prison.
The Seoul Southern District Court ordered the 58-year-old to be arrested, citing “concerns about destroying evidence and fleeing.” The ruling, delivered around midnight after hours of deliberation, is a milestone for a conglomerate that rose to the top of the country’s tech industry in just a few years, only to fall under the weight of government scrutiny.
Shares of Kakao, which have fallen by about a quarter this year, fell as much as 5.4% in Seoul on Tuesday. But shares of KakaoBank Corp. rose about 2% in brisk morning trading. The South Korean conglomerate may have to cut its stake in the online fintech affiliate—to make room for other investors—if the court finds Kim guilty.
For decades, South Korean authorities have convicted and imprisoned business leaders for alleged corruption or other wrongdoing — most recently Jay Y. Lee, now chairman of memory chip and smartphone maker Samsung Electronics Co. But Kim is the first of a new generation of tech entrepreneurs to run afoul of the law.
Kim, who is lauded for creating a messaging and social networking platform that links online services from banking to anime content, is facing allegations that he engaged in a stock manipulation scheme during the high-profile takeover of K-pop management company SM Entertainment in 2023.
His company won a controlling stake in SM after a bitter bidding war with Hybe Co., the record label behind the hit boy band BTS. Financial regulators have since accused executives at Kakao and its unit Kakao Entertainment Corp. of buying 240 billion won ($173 million) of SM shares at the time, in an attempt to thwart Hybe’s offer.
Kim and Kakao spokespeople have repeatedly denied the allegations and said no illegal activities occurred during the SM acquisition process. A Kakao spokesman declined to comment on the arrest warrant on Monday.
The arrest is a remarkable turnaround for a self-made billionaire who rose from poverty to build South Korea’s top internet company.
Kim—who as a boy shared a room with seven family members—founded the company that would become Kakao in 2006. He launched the wildly successful mobile messaging app KakaoTalk four years later, which has since become the center of an online empire that includes banking, shopping, gaming, and ride-hailing. At some point, he had overcome Samsung’s Mr. Lee is set to become the country’s richest man.
But that rapid rise has also drawn scrutiny. Regulators, concerned about Kakao’s expanding reach, have introduced measures to guard against monopolistic practices. In early 2022, a police investigation into reports that Kim evaded 886 billion won in taxes — stemming from a 2014 merger with rival Daum — was dropped. over $25 billion market value from Kakao and its subsidiaries such as Kakao Pay Corp., Kakao Games Corp. and KakaoBank. The company has called the allegations “baseless.”
Shares in Kakao, the main listing vehicle, have lost about three-quarters of their value since hitting an all-time high in 2021. Kim is now worth an estimated $3.6 billion — a fraction of his peak of $13 billion. But his group remains the country’s 15th-largest by assets, with 124 affiliates, according to data from the Fair Trade Commission and the company.
The latest scandal involves not only Kim but also many of his deputies.
Former South Korean government arrest Kakao’s investment director Bae Jae-hyun on the bidding war for SM Entertainment. It is unclear what Kim’s involvement was in that case.
IN Steps areShina Chung, the company’s former head of venture capital, became CEO to steer the company out of crisis.
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