Brian Kim, founder of South Korea's internet giant Kakao, was arrested Tuesday on charges of stock manipulation in connection with his 2023 acquisition of K-pop agency SM Entertainment.
The Seoul Southern District Court announced on the 28th that it had issued an arrest warrant for Kim after a hearing on Monday due to “risk of destruction of evidence and flight.”
He could face up to 20 days in jail as prosecutors conduct further investigations before indicting him, which could potentially disrupt Kakao’s AI operations and plans, as the founder was a key figure in the company’s strategic decisions.
A Kakao spokesperson told TechCrunch that the company will do its best to minimize the management gap with the co-chairs and council.
Kim is suspected of being involved in stock price manipulation during the 2023 SM Entertainment acquisition battle. Kakao was competing with Hybe, the parent company of Big Hit Entertainment, the agency for K-pop boy band BTS.
Kakao is accused of purchasing 240 billion won (about $174 million) worth of SM Entertainment stocks across 553 transactions in February 2023. This allegedly drove the company’s stock price higher than Hybe’s acquisition offer price of 120,000 won per share, which caused Hybe to withdraw its acquisition offer.
Kakao said in a statement last week that the claims were false, as Kim had never ordered or condoned any illegal activity.
Kakao's chief investment officer, Bae Jae-hyun, was arrested in October on charges of stock price manipulation after the acquisition and is currently on trial.
Founded in 2006, Kakao launched KakaoTalk, the most popular messenger app in South Korea, in 2010. The app has become a super app in South Korea and now offers a variety of services, including on-demand taxi service Kakao Mobility, online banking platform Kakao Bank, and music streaming service Melon. According to Tracxn, Kakao has completed 13 acquisitions between 2011 and 2022, with an average acquisition value of $546 million.
