Kim Beom-su, the billionaire founder of South Korean internet giant Kakao, was arrested on Tuesday over allegations of stock price manipulation during the company’s bid for one of the country’s largest K-pop agencies. Prosecutors have accused Kakao of rigging the stock price of SM Entertainment last year to prevent Hybe, the management company behind K-pop group BTS, from acquiring the company. Kakao eventually won the bid for an additional 35% stake in SM Entertainment, becoming its largest shareholder.
The Seoul Southern District Court approved the arrest warrant for Kim, citing concerns that he could destroy evidence and be a flight risk. Kim has not been formally charged but prosecutors plan to detain him for up to 20 days for further investigations before filing charges. Kim has denied the allegations, claiming that he had only approved the purchase of SM Entertainment’s shares and was not involved in the specific method or process of the purchase.
Following Kim’s arrest, Kakao’s shares fell 5.4% on Tuesday, marking the steepest daily decline in almost two years. The company has not yet responded to requests for comment on the situation. Last year, Kakao’s chief investment officer Bae Jae-hyun was also arrested for alleged stock price manipulation in the same bidding battle for SM Entertainment and is currently standing trial for his involvement in the case.
Kim Beom-su, 58, is considered one of South Korea’s most successful self-made entrepreneurs. He launched Kakao in 2010, which has since become the country’s most popular messaging app and has expanded into various other business sectors such as payments, banking, gaming, and ride-hailing services. Kim, who signed the Giving Pledge in 2021, stepped down as chairman of Kakao in 2022 but remains the company’s largest shareholder with a fortune of $3.3 billion, according to Forbes’ real-time billionaires ranking.
The allegations and arrest of Kim have raised concerns about the integrity of the bidding process for major companies in South Korea’s entertainment industry. SM Entertainment, home to popular K-pop groups like Aespa and EXO, is a key player in the highly competitive K-pop market. The ongoing investigation will shed light on the extent of manipulation in the bidding process and the involvement of key figures like Kim and Bae in the stock price rigging.
The case highlights the challenges faced by South Korea’s tech and entertainment industries, which have seen rapid growth and global success in recent years. As the investigation unfolds, it will be crucial to determine the impact of such allegations on Kakao’s reputation and future business endeavors. Kim’s denial of the allegations and the legal proceedings surrounding the case will be closely watched by industry insiders, investors, and fans of South Korea’s vibrant entertainment sector.
