A Seoul court has issued an arrest warrant for Brian Kim, the founder of South Korean internet giant Kakao, 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 announced on Tuesday that it had issued the warrant after a hearing on Monday, citing “concerns of evidence destruction and flight.” Kim could be detained for up to 20 days while prosecutors continue their investigation before pressing charges. This situation could potentially disrupt Kakao’s operations and plans, especially around AI, as Kim has been a key figure in strategic decisions.
A spokesperson for Kakao informed TechCrunch that the company would take steps to minimize the management gap with its co-chairs and council.
Kim is accused of manipulating SM Entertainment’s share price during a bidding war in 2023. Kakao was competing with Hybe, the owner of BigHit, the agency behind K-pop sensation BTS. The allegations suggest that Kakao purchased KRW 240 billion (~$174 million) worth of SM Entertainment shares over 553 trades in February 2023. This allegedly pushed the share price above Hybe’s tender offer of 120,000 KRW per share, causing Hybe to withdraw its offer.
Last week, Kakao stated that the allegations were false and that Kim had not ordered or tolerated any illegal activities. Additionally, Kakao’s Chief Investment Officer, Jae-Hyun Bae, was arrested last October on similar charges and is currently on trial.
Kakao, founded in 2006, launched South Korea’s most popular messaging app, KakaoTalk, in 2010. The app has grown into a Super App offering various services such as Kakao Mobility (on-demand taxi service), Kakao Bank (online banking), and Melon (music streaming). Between 2011 and 2022, Kakao completed 13 acquisitions, averaging $546 million per acquisition, according to Tracxn.
| Year | Acquisitions | Average Acquisition Amount |
|---|---|---|
| 2011 | 13 | $546 million |
This ongoing investigation into stock manipulation could significantly impact Kakao’s future plans and operations.
Featured Image courtesy of Nikkei Asia
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