South Korean authorities have arrested Kakao Corp. founder Brian Kim over allegations of market manipulation, making the web entrepreneur essentially the most outstanding enterprise determine within the nation in years to wind up in jail.
The Seoul Southern District Court docket made the choice to take the 58-year-old into custody, citing “issues of proof destruction and flight.” The ruling, which got here round midnight after hours of deliberation, is a milestone for a sprawling conglomerate that within the span of some years rose to the top of the nation’s expertise trade, then sagged below the load of presidency scrutiny.
Shares in Kakao, which have fallen by a couple of quarter this yr, slid as a lot as 5.4% in Seoul on Tuesday. Shares in KakaoBank Corp. gained about 2% in energetic morning commerce nonetheless. The Korean conglomerate could have to chop its stake within the on-line fintech affiliate—making room for different buyers— ifthe courts discover Kim responsible.
Korean authorities have for many years convicted and imprisoned company leaders over allegations of graft or different wrongdoing—most not too long ago Jay Y. Lee, now chairman of reminiscence chip and smartphone maker Samsung Electronics Co. Kim, nonetheless, is the primary of a brand new breed of tech entrepreneurs to run afoul of the legislation.
Kim, celebrated for making a messaging and social-media platform that linked on-line companies from banking to anime content material, is dealing with accusations that he was concerned in a stock-rigging scheme in the course of the high-profile takeover of Ok-pop company SM Leisure Co. in 2023.
His firm received a controlling stake in SM after an intense bidding battle with Hybe Co., the label behind boyband sensation BTS. Monetary regulators have since accused executives at Kakao and unit Kakao Leisure Corp. of shopping for 240 billion received ($173 million) in shares of SM on the time, to disrupt Hybe’s provide.
Kim and Kakao spokespeople have repeatedly denied the allegations and mentioned no unlawful actions transpired in the course of the acquisition of SM. A spokesperson for Kakao declined to touch upon the arrest warrant on Monday.
The arrest is a exceptional flip of occasions for a self-made billionaire who rose from poverty to construct Korea’s main web agency.
Kim—who as a boy shared a room with seven members of the family—based the corporate that may turn out to be Kakao in 2006. He began the massively profitable KakaoTalk cellular messaging app 4 years later, which might go on to turn out to be the center of a web-based empire spanning banking, purchasing, gaming and ride-hailing. At one level, he surpassed Samsung’s Lee to turn out to be the nation’s richest particular person.
However that meteoric ascent additionally attracted intense scrutiny. Regulators, involved about Kakao’s widening enterprise attain, instituted measures to safeguard towards monopolistic practices. In early 2022, a police investigation into experiences that Kim dodged 886 billion received of taxes—stemming from a 2014 merger with rival Daum—worn out greater than $25 billion of market worth from Kakao and subsidiaries resembling Kakao Pay Corp., Kakao Video games Corp. and KakaoBank. The corporate has known as these allegations “groundless.”
Shares in Kakao, the principle listed automobile, have shed some three-quarters of their worth since a 2021 lifetime excessive. Kim’s fortune is now estimated at about $3.6 billion — a fraction of his peak at north of $13 billion. However his group remains to be the nation’s fifteenth largest conglomerate by property, with 124 associates, in line with knowledge from the Truthful Commerce Fee and the corporate.
The newest scandal has ensnared not simply Kim, however plenty of his lieutenants.
South Korean authorities beforehand arrested Kakao’s chief funding officer, Bae Jae-hyun, over the bidding warfare for SM Leisure. It’s unclear what Kim’s involvement in that case may need been.
In March, Shina Chung, the previous head of its company venture-capital arm, grew to become chief government officer to guide the agency out of disaster.
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