The billionaire founder of South Korean technology giant Kakao, Kim Beom-su, was arrested on Tuesday on allegations of stock manipulation related to the company's investment in one of the country's largest K-pop agencies. A high-profile bidding war broke out over the agency, SM Entertainment, early last year. Prosecutors allege Kakao manipulated SM Entertainment's stock price to hinder Hybe, the company behind BTS, from acquiring the agency whose roster of artists includes Girls' Generation.
Last year, prosecutors indicted Kakao's chief investment officer and the company itself on stock manipulation charges. The Seoul Southern District Court confirmed that Mr. Kim had been arrested on Tuesday morning. Mr. Kim, who has not been formally charged, has denied the allegations.
In a statement released last week, Kakao said that during a company meeting, Mr. Kim had said,“The allegations are not true. I have never instructed or condoned any illegal acts.”
Asked for comment about Mr. Kim's arrest, a Kakao spokeswoman said that “the current situation is unfortunate.”
Kakao's messaging and payment apps have become crucial infrastructure in South Korea, and the company is worth about $13 billion in market value. KakaoTalk, a messaging app, is installed on over 90 percent of phones in South Korea.
The deal with SM Entertainment was intended to help Kakao establish a foothold in K-pop and expand abroad, tapping the South Korean culture wave. Around the time of the deal, Kakao said the investment would help accelerate its “vision of going ‘Beyond Korea’ and ‘Beyond Mobile.’”
Kim Beom-su is a founder of one of South Korea's biggest technology companies, Kakao. Credit...Agence France-Presse, via Getty Images Kakao's arrest comes amidst heightened scrutiny of the company's business practices. In recent years, Kakao has faced criticism for its dominance in the South Korean market and allegations of anti-competitive behavior.
The arrest is a significant development in the ongoing investigation into Kakao's alleged stock manipulation. It remains to be seen whether Mr. Kim will be formally charged and if so, what the outcome of the case will be.
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