Seoul, South Korea — Kim Beom-su, the billionaire founder of South Korean tech giant Kakao Corp, was arrested on Tuesday under suspicion of manipulating stocks during the acquisition of a K-Pop agency last year.
The arrest marks a significant legal development for Kakao, renowned for operating South Korea’s largest chat app, following previous trials involving the company and another executive linked to the same acquisition.
Known as Brian Kim, he is regarded as a visionary in South Korea’s digital industry for transforming Kakao’s affiliates, valued at 86 trillion won ($62 billion) in assets, since launching the chat app in 2010.
Industry analysts suggest any legal proceedings against Kim could impact Kakao’s investments in artificial intelligence and its global expansion initiatives.
Prosecutors allege Kim manipulated the stock price of SM Entertainment in February last year to obstruct a potential acquisition by competitor Hybe. Kakao denies the accusations, stating Kim did not authorize or condone any illegal activities.
As the largest shareholder of Kakao Corp with a 24% stake, Kim’s arrest was approved by the Seoul Southern District Court to prevent evidence tampering and due to flight risk concerns, according to court officials.
Currently held at the Seoul Nambu Detention Centre, Kim’s arrest allows prosecutors up to 20 days for further investigation before deciding on formal charges, adhering to South Korean criminal procedure.
Potential repercussions from the case could affect Kakao’s control over its online banking arm KakaoBank Corp, given financial regulations restrict individuals convicted of financial crimes from holding more than a 10% stake in a bank.
Amidst regulatory scrutiny, Kakao may face challenges in making strategic decisions concerning AI investments and international expansion, despite plans to launch new AI services this year.
During morning trade, Kakao Corp shares declined by 3.4%, reaching their lowest point since November, continuing a year-to-date decrease of 24%.
