Arrested for manipulating stocks is the founder of the tech giant Kakao.

According to a Seoul court, the billionaire founder of the South Korean internet giant Kakao was taken into custody early on Tuesday and is charged with manipulating stock prices during the purchase of K-pop giant SM Entertainment.

Since its founding in 2010, Kakao has expanded into a vast empire that now controls everything from a significant online bank to the top taxi-hailing app in South Korea. It also owns KakaoTalk, the largest messaging app in the nation, which is installed on 90% of phones.

Its extensive entertainment portfolio also includes talent management and record labels, which it greatly expanded last year when it acquired a dominant 39.87 percent part in SM Entertainment, making it the company’s biggest shareholder.

The prosecution claims that in February 2023, Kakao purchased 240 billion won ($173 million) worth of SM shares on 553 separate times at inflated rates, all with the intention of obstructing a takeover offer by HYBE, the company that represents K-pop sensations BTS.

After SM’s stock price surged, HYBE canceled its offer to buy additional shares at a price of 120,000 won each, despite having already acquired a 14.8% stake from SM’s founder, Lee Soo-man.

Kim Beom-su, the founder of Kakao, faces the possibility of running away and destroying evidence, thus the Seoul Southern District Court authorized an arrest order for him, according to a statement.

Prosecutors indicated that more Kakao executives had been questioned by authorities.

Kim expressed regret that the incident happened during a Kakao emergency group meeting last week, stating that “group members are working together to renovate management and innovate AI-based technology.”

The accusations against him, he later claimed, were “not true.”

Kim stated in a press release released to AFP on Tuesday, “I believe the facts will be revealed in the end as I have never ordered or tolerated any illegal activities.”

According to experts, the corporation may have issues as a result of the leader of the company’s imprisonment.

According to Choi Kyoung-jin, a law professor at Gachon University in South Korea, “Kakao’s AI-based innovation will likely meet difficulty due to the absence of the company’s head,” and the organization will have to concentrate its efforts on removing total risk and judicial risk.

He continued, “The group will probably continue to be at risk for a considerable amount of time due to the leader’s absence from Kakao.”
“Kakao’s governance will need to be reorganized.”