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South Korean Authorities Issue Arrest Warrant for Kakao Corp. Founder
South Korean authorities have issued an arrest warrant for Kakao Corp. founder, Brian Kim, on allegations of violating capital market laws. This development could make him the most notable business figure to face jail in recent years.
Allegations of Stock-Rigging
Kim, a 58-year-old internet entrepreneur celebrated for creating a popular messaging and social media platform, is accused of getting involved in a stock-rigging scheme during the high-profile takeover of SM Entertainment Co. in 2023. Kakao secured a controlling stake in SM after an intense bidding war with Hybe Co., the label behind the globally-renowned boyband, BTS. Financial regulators allege that executives at Kakao and its unit, Kakao Entertainment Corp., purchased 240 billion won ($173 million) in SM shares during that period to disrupt Hybe’s offer.
Kakao’s Position
Brian Kim and Kakao spokespeople have consistently denied these allegations, asserting that no illegal activities occurred during the acquisition of SM. Representatives for the company were not immediately available for comment outside normal business hours.
A Remarkable Business Journey
The arrest warrant marks a significant turn of events for a self-made billionaire who rose from poverty to build South Korea’s leading internet firm. Kim founded the company that would evolve into Kakao in 2006 and launched the hugely successful KakaoTalk mobile messaging app four years later. He expanded the company into various sectors, including online banking, shopping, gaming, and ride-hailing services. Today, Kakao ranks as South Korea’s 15th largest conglomerate by assets, according to data from the Fair Trade Commission and the company.
Regulatory Scrutiny
Kakao's rapid expansion has drawn regulatory scrutiny and criticism, particularly over accusations that it harmed mom-and-pop stores. Earlier this year, Shina Chung, the former head of the company’s corporate venture-capital arm, was appointed as chief executive officer to steer the firm through its ongoing crisis. Kakao’s shares have plummeted, losing about three-quarters of their value since their peak in 2021.
Historical Context
Korean authorities have a history of convicting and imprisoning corporate leaders over allegations of graft or other misconduct. The most recent high-profile case involved Jay Y. Lee, now chairman of Samsung Electronics Co. Brian Kim, however, is the first among a new wave of tech entrepreneurs to encounter such legal troubles.
As this case unfolds, it will undoubtedly have significant ramifications for Kakao Corp and South Korea’s tech industry at large.
