Kakao Founder Kim Beom-su Arrested in South Korea for Alleged Stock Manipulation

Founder of South Korea's Kakao arrested for suspected stock manipulation

SEOUL, July 23 (Reuters) - South Korean authorities arrested Kim Beom-su, the billionaire founder of tech giant Kakao Corp (035720.KS), opens new tab on Tuesday, on accusations of manipulating stocks during the acquisition of a K-Pop agency last year. It is the latest legal twist for Kakao, which runs South Korea's largest chat app, after the company and another executive went on trial last year, accused of wrongdoing during the acquisition. Founder Kim, also known as Brian Kim, is seen as a visionary in South Korea's digital industry for building from the ground up the Kakao group, worth 86 trillion won ($62 billion) by assets, since the chat app launched in 2010. Any case against him could jeopardise Kakao's investments into artificial intelligence as well as its plans to expand overseas, industry experts said. Prosecutors say Kim was involved in manipulating the stock price of SM Entertainment (041510.KQ), opens new tab in February last year to hinder a competitor, Hybe (352820.KS), opens new tab, from acquiring it. In a statement, Kakao Corp called the situation "unfortunate", adding that its chief executive, Shina Chung, would lead the effort to minimise any management vacuum. Kim has denied the accusations, saying he never ordered or tolerated any illegal activity, the company said in a statement. He has not yet been formally charged. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a 24% stake that he and affiliated entities control. Seoul Southern District Court approved the arrest warrant to prevent the potential destruction of evidence, and because Kim was a flight risk, a court official said on Tuesday. Kim is being held at the Seoul Nambu Detention Centre, a prosecution spokesperson said. His arrest will last for up to 20 days, during which prosecutors will investigate further before deciding whether to indict him, according to South Korean criminal procedure. The outcome of any case against Kim could jeopardise Kakao group's control of online bank arm KakaoBank Corp (323410.KS), opens new tab, since the country's financial rules restrict those convicted of financial crime from owning a more than a 10% stake in a bank. Kakao is also likely to face regulatory scrutiny, making it harder to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, industry experts said. The company plans to introduce new AI services this year. Kakao Corp shares, which have lost 24% this year, closed down 5.4% in their biggest daily fall since Dec. 15, 2022. Affiliates Kakaopay (377300.KS), opens new tab and Kakao Games (293490.KQ), opens new tab fell to record lows, down 7.8% and 5.2%, respectively. Kakaobank (323410.KS), opens new tab fell 3.8%. ($1=1,389.2700 won) Reporting by Joyce Lee in Seoul; Additional reporting by Jihoon Lee; Editing by Matthew Lewis and Miral Fahmy Our Standards: The Thomson Reuters Trust Principles., opens new tab

Founder of South Korea's Kakao arrested for suspected stock manipulation

Kim, who is also known as Brian Kim, is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth 86 trillion won ($62 billion) by assets - from the ground up since launching the chat app in 2010. Any case against him could jeopardise Kakao's investments into artificial intelligence as well as its overseas expansion plans, industry experts said. Prosecutors say Kim was involved in manipulating the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring it. Kim has denied the accusations, saying he never ordered or tolerated any illegal activity, the company said in a statement. He has so far not been formally charged. Kakao and Kim's lawyer did not immediately provide further comment on Tuesday. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a 24% stake that he and affiliated entities control. Seoul Southern District Court approved the arrest warrant to prevent the potential destruction of evidence, and because Kim was a flight risk, a court official said on Tuesday. Kim is being held at the Seoul Nambu Detention Centre, a prosecution spokesperson said. His arrest will last up to 20 days, during which the prosecutors will investigate further before deciding whether to indict him, according to South Korean criminal procedure. The outcome of any case against Kim could jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a more than a 10% stake in a bank. Kakao is also likely to be subject to regulatory scrutiny, making it tougher for the company to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, industry experts said. The company plans to introduce new AI services this year. Kakao Corp shares dropped 3.4% during morning trade to the lowest since November, after falling 24% year-to-date. (Reporting by Joyce Lee in Seoul; Additional reporting by Jihoon Lee; Editing by Ed Davies, Clarence Fernandez and Matthew Lewis and Miral Fahmy)

Founder of South Korea's Kakao arrested for suspected stock manipulation

* Kim accused of manipulating SM Entertainment stock * Founder says no illegal activity was ordered or tolerated * Regulatory scrutiny may impact AI and expansion plans SEOUL, July 23 (Reuters) - The billionaire founder of South Korean tech giant Kakao Corp, Kim Beom-su was arrested on Tuesday on accusations of manipulating stocks during the acquisition of a K-Pop agency last year. The case is the latest legal twist for Kakao, which runs South Korea's largest chat app, after the company and another executive went on trial last year for alleged wrongdoing during the same acquisition. Kim, who is also known as Brian Kim, is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth 86 trillion won ($62 billion) by assets - from the ground up since launching the chat app in 2010. Any case against him could jeopardise Kakao's investments into artificial intelligence as well as its overseas expansion plans, industry experts said. Prosecutors say Kim was involved in manipulating the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring it. Kim has denied the accusations, saying he never ordered or tolerated any illegal activity, the company said in a statement. He has so far not been formally charged. Kakao and Kim's lawyer did not immediately provide further comment on Tuesday. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a 24% stake that he and affiliated entities control. Seoul Southern District Court approved the arrest warrant to prevent the potential destruction of evidence, and because Kim was a flight risk, a court official said on Tuesday. Kim is being held at the Seoul Nambu Detention Centre, a prosecution spokesperson said. His arrest will last up to 20 days, during which the prosecutors will investigate further before deciding whether to indict him, according to South Korean criminal procedure. The outcome of any case against Kim could jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a more than a 10% stake in a bank. Kakao is also likely to be subject to regulatory scrutiny, making it tougher for the company to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, industry experts said. The company plans to introduce new AI services this year. Kakao Corp shares dropped 3.4% during morning trade to the lowest since November, after falling 24% year-to-date. ($1=1,389.2700 won) (Reporting by Joyce Lee in Seoul; Additional reporting by Jihoon Lee; Editing by Ed Davies, Clarence Fernandez and Matthew Lewis and Miral Fahmy)

South Korean court approves arrest warrant for Kakao founder

* Kakao founder Kim accused of manipulating SM Entertainment stock to hinder Hybe acquisition * Kim denies accusations, stating no illegal activity was ordered or tolerated * Kakao shares down 24% YTD; regulatory scrutiny may impact AI and expansion plans SEOUL, July 23 (Reuters) - A South Korean court approved early on Tuesday a prosecution request for a warrant to arrest Brian Kim, the billionaire founder of tech giant Kakao Corp , on accusations of stock manipulation during a 2023 acquisition. It is the latest legal twist for Kakao after the company and an executive went on trial last year for alleged wrongdoing during the same acquisition. This is also one of the biggest potential risks faced by Kim, who is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth a total of 86 trillion won ($62 billion) by assets according to government data - from the ground up since launching its chat app in 2010. Prosecutors say Kim was involved in manipulation of the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring the K-Pop agency. Not yet formally charged, Kim has denied the accusations, saying he has never ordered or tolerated any illegal activity, the company said in a statement. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a stake of 24% controlled by him or affiliated entities. The Seoul Southern District Court approved the warrant to stem a risk of destroying evidence or absconding, a court official said. The court ruled only on whether a warrant is appropriate, and not on the prosecution's allegations. Kim's arrest would last up to 20 days, during which prosecutors are expected to investigate further before bringing charges, according to South Korean criminal procedure. Analysts said the outcome of any case against Kim could also jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a stake of more than 10% in a bank. Continued regulatory and social scrutiny is also seen making it tougher for the operator of South Korea's largest chat app to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, they said. The company plans to introduce new AI services this year. Kakao Corp shares have fallen 24% year-to-date. Kim heads a "corporate alignment" council that coordinates the interests of the Kakao group's 128 affiliates and decides what businesses to concentrate on. ($1=1,389.2700 won) (Reporting by Joyce Lee in Seoul; Editing by Ed Davies, Clarence Fernandez and Matthew Lewis)

Founder of South Korea's Kakao arrested for suspected stock manipulation | CNN Business

Seoul, South Korea -- The billionaire founder of South Korean tech giant Kakao Corp, Kim Beom-su was arrested on Tuesday on accusations of manipulating stocks during the acquisition of a K-Pop agency last year. The case is the latest legal twist for Kakao, which runs South Korea's largest chat app, after the company and another executive went on trial last year for alleged wrongdoing during the same acquisition. Kim, who is also known as Brian Kim, is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth 86 trillion won ($62 billion) by assets - from the ground up since launching the chat app in 2010. Any case against him could jeopardize Kakao's investments into artificial intelligence as well as its overseas expansion plans, industry experts said. Prosecutors say Kim was involved in manipulating the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring it. KakaoTalk logo on the App Store Jakub Porzycki/NurPhoto/Getty Images Kim has denied the accusations, saying he never ordered or tolerated any illegal activity, the company said in a statement. He has so far not been formally charged. Kakao and Kim's lawyer did not immediately provide further comment on Tuesday. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a 24% stake that he and affiliated entities control. Seoul Southern District Court approved the arrest warrant to prevent the potential destruction of evidence, and because Kim was a flight risk, a court official said on Tuesday. Kim is being held at the Seoul Nambu Detention Centre, a prosecution spokesperson said. His arrest will last up to 20 days, during which the prosecutors will investigate further before deciding whether to indict him, according to South Korean criminal procedure. The outcome of any case against Kim could jeopardize Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a more than a 10% stake in a bank. Kakao is also likely to be subject to regulatory scrutiny, making it tougher for the company to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, industry experts said. The company plans to introduce new AI services this year. Kakao Corp shares dropped 3.4% during morning trade to the lowest since November, after falling 24% year-to-date.

South Korea court to decide on arrest warrant for Kakao founder

SEOUL, July 22 (Reuters) - A South Korean court began reviewing on Monday a prosecution request for a warrant to arrest Brian Kim, the billionaire founder of tech giant Kakao Corp, on accusations of stock manipulation during a 2023 acquisition. It is the latest legal twist for Kakao after the company and an executive went on trial last year for alleged wrongdoing during the same acquisition. Prosecutors say Kim was involved in manipulation of the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring the K-Pop agency. Not yet formally charged, Kim has denied the accusations, saying he has never ordered or tolerated any illegal activity, the company said in a statement. The high-profile tech entrepreneur is the founder and largest shareholder of Kakao Corp, with a stake of 24% controlled by him or affiliated entities. The court, which is expected to announce its decision late on Monday or early Tuesday, will only rule whether a warrant is appropriate, and not on the prosecution's allegations. Analysts said the outcome of any case against Kim could also jeopardize Kakao group's control of online bank arm KakaoBank Corp, since the rules restrict those convicted of financial crime from owning a stake of more than 10% in a bank. Continued regulatory and social scrutiny is also seen making it tougher for bold decisions by the operator of South Korea's largest chat app on investments in artificial intelligence (AI) and affiliates' fundraising plans, such as IPOs, they said. The company plans to introduce new AI services this year. Kim heads a "corporate alignment" council that co-ordinates the interests of the Kakao group's 128 affiliates and decides what businesses to concentrate on. ($1=1,389.2700 won) (Reporting by Joyce Lee; Editing by Ed Davies and Clarence Fernandez)

South Korea court to decide on arrest warrant for Kakao founder

Prosecutors say Kim was involved in manipulation of the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring the K-Pop agency. Not yet formally charged, Kim has denied the accusations, saying he has never ordered or tolerated any illegal activity, the company said in a statement. The high-profile tech entrepreneur is the founder and largest shareholder of Kakao Corp, with a stake of 24% controlled by him or affiliated entities. The court, which is expected to announce its decision late on Monday or early Tuesday, will only rule whether a warrant is appropriate, and not on the prosecution's allegations. Analysts said the outcome of any case against Kim could also jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the rules restrict those convicted of financial crime from owning a stake of more than 10% in a bank. Continued regulatory and social scrutiny is also seen making it tougher for bold decisions by the operator of South Korea's largest chat app on investments in artificial intelligence (AI) and affiliates' fundraising plans, such as IPOs, they said. The company plans to introduce new AI services this year. Kim heads a "corporate alignment" council that co-ordinates the interests of the Kakao group's 128 affiliates and decides what businesses to concentrate on. ($1=1,389.2700 won) (Reporting by Joyce Lee; Editing by Ed Davies and Clarence Fernandez)

South Korea Court to Decide on Arrest Warrant for Kakao Founder

SEOUL (Reuters) - A South Korean court began reviewing on Monday a prosecution request for a warrant to arrest Brian Kim, the billionaire founder of tech giant Kakao Corp, on accusations of stock manipulation during a 2023 acquisition. It is the latest legal twist for Kakao after the company and an executive went on trial last year for alleged wrongdoing during the same acquisition. Prosecutors say Kim was involved in manipulation of the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring the K-Pop agency. Not yet formally charged, Kim has denied the accusations, saying he has never ordered or tolerated any illegal activity, the company said in a statement. The high-profile tech entrepreneur is the founder and largest shareholder of Kakao Corp, with a stake of 24% controlled by him or affiliated entities. The court, which is expected to announce its decision late on Monday or early Tuesday, will only rule whether a warrant is appropriate, and not on the prosecution's allegations. Analysts said the outcome of any case against Kim could also jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the rules restrict those convicted of financial crime from owning a stake of more than 10% in a bank. Continued regulatory and social scrutiny is also seen making it tougher for bold decisions by the operator of South Korea's largest chat app on investments in artificial intelligence (AI) and affiliates' fundraising plans, such as IPOs, they said. The company plans to introduce new AI services this year. Kim heads a "corporate alignment" council that co-ordinates the interests of the Kakao group's 128 affiliates and decides what businesses to concentrate on. ($1=1,389.2700 won) (Reporting by Joyce Lee; Editing by Ed Davies and Clarence Fernandez)

South Korean court approves arrest warrant for Kakao founder

This is also one of the biggest potential risks faced by Kim, who is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth a total of 86 trillion won ($62 billion) by assets according to government data - from the ground up since launching its chat app in 2010. Prosecutors say Kim was involved in manipulation of the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring the K-Pop agency. Not yet formally charged, Kim has denied the accusations, saying he has never ordered or tolerated any illegal activity, the company said in a statement. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a stake of 24% controlled by him or affiliated entities. The Seoul Southern District Court approved the warrant to stem a risk of destroying evidence or absconding, a court official said. The court ruled only on whether a warrant is appropriate, and not on the prosecution's allegations. Kim's arrest would last up to 20 days, during which prosecutors are expected to investigate further before bringing charges, according to South Korean criminal procedure. Analysts said the outcome of any case against Kim could also jeopardise Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a stake of more than 10% in a bank. Continued regulatory and social scrutiny is also seen making it tougher for the operator of South Korea's largest chat app to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, they said. The company plans to introduce new AI services this year. Kim heads a "corporate alignment" council that coordinates the interests of the Kakao group's 128 affiliates and decides what businesses to concentrate on. (Reporting by Joyce Lee in Seoul; Editing by Ed Davies, Clarence Fernandez and Matthew Lewis)

Billionaire founder of Kakao arrested in K-pop stock manipulation case

The billionaire founder of South Korea's leading internet company Kakao has been arrested in connection with alleged stock manipulation during last year's heated bidding battle for a K-pop agency. Seoul's Southern District Court issued the arrest warrant on Tuesday for Brian Kim, citing concerns about destruction of evidence and flight risk. It is the latest legal twist for the internet giant as the group faces closer regulatory scrutiny. Kakao took over SM Entertainment last year after winning an intense bidding contest with Hybe, the agency behind K-pop sensation BTS. But financial regulators have accused Kakao executives of buying Won240bn ($173mn) of SM shares to undermine Hybe's tender offer. Kim has denied involvement in any illegal activities connected to the SM acquisition. Kakao's chief investment officer Bae Jae-hyun is standing trial for his involvement in the case. Bae has also denied any wrongdoing. Kim has been celebrated as one of the country's most successful internet entrepreneurs after creating Kakao's popular messenger app in 2010. He is one of South Korea's few self-made billionaires -- a rare feat in a country where the economy is dominated by a handful of big family-run conglomerates known as chaebol. Rising from poverty, he has built an internet giant whose businesses range from social media and internet portals to online banking, shopping and gaming. Kakao is now the country's 15th largest conglomerate by assets, according to the Korea Fair Trade Commission Kim is the most high-profile businessman to be taken into custody in South Korea in years. Samsung Electronics chair Lee Jae-yong was arrested in 2017 on corruption charges but was later pardoned. There is currently a separate case against him alleging stock price manipulation and accounting fraud. Kakao's rapid expansion over the past decade has sparked criticism that the group is hurting local bricks-and-mortar stores. It has become a main target of scrutiny as South Korean authorities strengthen regulations against internet giants. Kim's legal trouble clouds Kakao's business prospects at a time when the group is accelerating investments in artificial intelligence and expanding its overseas presence with digital comics known as webtoons. Kakao plans to introduce new AI services this year. In a statement, Kakao expressed regret over Kim's arrest and said it would do its best to minimise any leadership vacuum. Kim is the largest Kakao shareholder: he and his affiliated parties own a 24 per cent stake. If found guilty, he may lose control of online lender KakaoBank, with those convicted of financial crimes barred from owning a stake of more than 10 per cent in a bank under South Korean laws. Kakao's share price has fallen by 77 per cent since hitting a record high in 2021, giving it a current market valuation of Won17.4tn. Its stock dropped 4.6 per cent on Tuesday, while the benchmark Kospi rose 0.4 per cent.

Kakao Shares Slump After Founder's Arrest Over Alleged Stock Rigging

Kakao Corp. founder Brian Kim has been arrested over allegations of stock-price manipulation during the acquisition of a K-pop agency last year, sending shares on their sharpest daily decline in nearly two years. Shares of the South Korean mobile internet platform giant fell as much as 5.7% to 38,700 won ($27.89) early Tuesday, on course for their steepest daily decline since late 2022. A Seoul court earlier at dawn approved an arrest warrant for Kim sought by prosecutors investigating the stock-rigging case, according to officials at the Seoul Southern District Prosecutors' Office. The court deemed Kim a flight risk, citing concerns about evidence destruction, they said. The prosecution said Kim had been involved in manipulating the stock price of South Korean K-pop talent company SM Entertainment, then up for sale in February 2023, to frustrate its rival bidder HYBE, the label behind boyband BTS. Kakao later acquired SM Entertainment. Kim has denied his involvement in the alleged stock manipulation. Market analysts said that any criminal charges against Kim, who controls the operator of the country's largest messaging app, KakaoTalk, internet-based lender KakaoBank and many other affiliates, could delay investments in new businesses, including artificial-intelligence projects. South Korean laws ban individuals convicted of financial crimes from owning a major stake in any financial institution. Prosecutors plan to detain Kim for up to 20 days to conduct further investigations before bringing the case to court.

Kakao founder arrested over alleged market manipulation | TechCrunch

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.

Kakao faces gloomy outlook following founder's arrest

Kakao founder Kim Beom-su enters the Seoul Southern District Court in Yangcheon District, Seoul, Monday, to attend a court review on an arrest warrant against him. The court issued the warrant early Tuesday. Yonhap Future investments, governance restructuring grind to halt due to leader's absenceBy Nam Hyun-woo Kakao, Korea's leading messaging app operator, faces a troubling outlook following a court's decision to arrest its founder, Kim Beom-su, on allegations of stock price rigging. The escalating prospect of his conviction threatens to disrupt the company's future investment strategies and business restructuring efforts. At around 1:30 a.m., Tuesday, the Seoul Southern District Court issued an arrest warrant against Kim. He is currently facing charges of breaching financial regulations in the course of Kakao's acquisition of a stake in K-pop management agency SM Entertainment last year. Prosecutors suspect Kim of being part of an alleged scheme in which leaders of Kakao-affiliated companies manipulated SM Entertainment's stock price to sway the outcome of a bidding race against HYBE, the parent company of BigHit, which manages the globally popular K-pop group BTS. Kim has consistently denied any involvement in the allegations. During a meeting with Kakao affiliate leaders on July 18, he stated that the charges against him are "not true," and underscored the need for Kakao to reform its governance to fulfill public expectations. In a text message to reporters, Kakao said, "We regret the current situation, but will do our best to fill the management gap under the leadership of Chung Shin-a, co-chair of the Corporate Alignment (CA) Council." Chung is the CEO of Kakao. Kakao founder Kim Beom-su attends a meeting with the CEOs of Kakao affiliates at the company's office in Pangyo, Gyeonggi Province, July 18. Courtesy of Kakao Kim's arrest raises serious concerns about the future of Korea's largest messaging app operator and the stability of its extensive network of affiliates. Since late last year, Kakao has been working to regain the trust of the market, investors, the general public, and the government by overhauling its business practices. Kakao launched a Compliance and Trust Committee and replaced the CEOs of key subsidiaries to initiate management reforms. To spearhead governance restructuring and lead Kakao's belated entry into the AI competition, Kim, who had stepped down as chairman of the board in 2022, returned to the company's management by establishing the CA Council and assuming its chairmanship. Kim's influence across Kakao affiliates is backed by his ownership of Kakao stakes. He is the largest shareholder of Kakao with a 13.32 percent stake. In addition, K Cube Holdings, the second-largest shareholder with a 10.43 percent stake, is wholly owned by Kim, giving him control over a combined 23.75 percent of Kakao's shares. Being the largest shareholder of Kakao allows Kim to exert effective control across a vast network of Kakao companies, which hold full or controlling interests in dozens of affiliates and extend to more than a hundred subsidiaries. According to the Fair Trade Commission, Kakao was Korea's 15th-largest conglomerate as of May and the second-largest in terms of the number of subsidiaries and affiliates, which stands at 128. Considering his influence over Kakao's overall business activities, Kim's arrest is expected to pause mergers and acquisitions, investments, and initial public offerings of Kakao's affiliates, since these actions require approval from the top decision-maker. Kakao companies have already suffered setbacks in their investment bids stemming from Kim's legal risks. In December, Kakao's fintech subsidiary, Kakao Pay, failed to complete its acquisition of a controlling stake in Siebert, a U.S. brokerage, apparently due to the stock rigging allegation. Similarly, in the same month, Kakao Mobility's attempt to acquire FreeNow, Europe's largest taxi-hailing platform, also ran into a deadlock. Teh logo of KakaoBank / Courtesy of Kakao Bank Kim's arrest also threatens Kakao's status as the largest stakeholder in KakaoBank. Korea's laws stipulate that a non-financial company can retain its largest stakeholder status in an internet-only bank only when it has no history of facing fines or stiffer punishments for financial crimes for the past five years. Kakao now holds a controlling 27.17 percent stake in KakaoBank. If Kakao loses its status, it has to reduce its stake to 10 percent. "The arrest warrant implies a greater likelihood of Kim facing a guilty verdict," Samsung Securities analyst Oh Dong-hwan said. "Although it will take a long time before the final court ruling, the fact that Kakao's management has to divert its resources to address legal risks will adversely affect the company's ability to discover new growth engines." Upon Kim's arrest, Kakao companies' shares closed lower on Tuesday. Kakao ended at 38,850 won, down 5.36 percent from a day earlier. Its affiliates, Kakao Games and Kakao Pay, closed down 5.38 percent and 7.81 percent, respectively. KakaoBank suffered a sharp fluctuation due to mixed interpretations over Kakao possibly unloading its stake and closed at 20,300 won, down 3.79 percent from a day earlier.

Kim Beom-su, billionaire founder of South Korean tech giant Kakao, arrested - VnExpress International

The case is the latest legal twist for Kakao, which runs South Korea's largest chat app, after the company and another executive went on trial last year for alleged wrongdoing during the same acquisition. Kim, who is also known as Brian Kim, is seen as a visionary in South Korea's digital industry for building Kakao's group of affiliates - worth 86 trillion won ($62 billion) by assets - from the ground up since launching the chat app in 2010. Any case against him could jeopardize Kakao's investments into artificial intelligence as well as its overseas expansion plans, industry experts said. Prosecutors say Kim was involved in manipulating the stock price of SM Entertainment in February last year to hinder a competitor, Hybe, from acquiring it. Kim has denied the accusations, saying he never ordered or tolerated any illegal activity, the company said in a statement. He has so far not been formally charged. Kakao and Kim's lawyer did not immediately provide further comment on Tuesday. The high-profile tech entrepreneur is the largest shareholder of Kakao Corp, with a 24% stake that he and affiliated entities control. Seoul Southern District Court approved the arrest warrant to prevent the potential destruction of evidence, and because Kim was a flight risk, a court official said on Tuesday. Kim is being held at the Seoul Nambu Detention Center, a prosecution spokesperson said. His arrest will last up to 20 days, during which the prosecutors will investigate further before deciding whether to indict him, according to South Korean criminal procedure. The outcome of any case against Kim could jeopardize Kakao group's control of online bank arm KakaoBank Corp, since the country's financial rules restrict those convicted of financial crime from owning a more than a 10% stake in a bank. Kakao is also likely to be subject to regulatory scrutiny, making it tougher for the company to make major decisions on investments in artificial intelligence (AI) and overseas business expansion, industry experts said. The company plans to introduce new AI services this year. Kakao Corp shares dropped 3.4% during morning trade to the lowest since November, after falling 24% year-to-date.