Brian Kim, the founder of South Korean internet giant Kakao, was arrested Tuesday on allegations of stock price manipulation related to the company’s takeover of K-pop agency SM Entertainment in 2023.
The Seoul Southern District Court said on Tuesday that it had issued a warrant for Kim’s arrest after a hearing on Monday due to “concerns of evidence destruction and flight.”
He could be jailed for up to 20 days as prosecutors investigate further before bringing charges. This could potentially disrupt Kakao’s operations and plans around AI, as the founder has been a key figure in the company’s strategic decisions.
A spokesperson at Kakao told TechCrunch that the firm would do all it could to minimize the management gap with its co-chairs and council.
Kim is facing accusations that he was involved in manipulating SM Entertainment’s share price during a bidding war for that company in 2023. Kakao was competing with Hybe, the owner of South Korean music agency BigHit, which is behind K-pop boyband BTS.
Kakao is reportedly accused of purchasing KRW 240 billion (~ $174 million) of SM Entertainment’s shares over 553 trades in February 2023. That allegedly drove the company’s share price above Hybe’s tender offer price of 120,000 KRW per share, which caused Hybe to withdraw its offer.
Kakao said in a statement last week that the allegations are not true, as Kim had never ordered or tolerated any illegal activities.
Kakao’s chief investment officer, Jae-Hyun Bae, was arrested last October following allegations of stock price manipulation after the takeover. He is currently on trial.
Kakao, founded in 2006, launched South Korea’s most popular messaging app, KakaoTalk, in 2010. It became the country’s Super App and now offers an array of services, including on-demand taxi service Kakao Mobility, online banking platform Kakao Bank, and music streaming service Melon. From 2011 to 2022, Kakao completed 13 acquisitions, with an average acquisition amount of $546 million, according to Tracxn.