Founder of South Korean technology giant Kakao arrested in stock price manipulation case

SEOUL, South Korea — South Korean prosecutors said Tuesday they had arrested the founder of technology giant Kakao Corp. on suspicion of stock price manipulation during his company’s acquisition of a major K-pop agency last year.

Kim’s arrest came after the southern Seoul District Court issued an arrest warrant, citing fears that he might flee or destroy evidence.

Prosecutors have up to 20 days to investigate Kim and decide whether to press charges against him, a senior prosecutor at the Seoul District Prosecutors’ Office said, requesting anonymity because an investigation is ongoing.

According to prosecutors, Kim is accused of planning and approving a collaboration with the operator of a private equity fund to manipulate the share price of the K-pop agency SM Entertainment and thus prevent the purchase of SM Entertainment by Hybe Corp., the parent company of another K-pop heavyweight behind global sensation BTS.

Kim, 58, denied the allegations, according to the Seoul prosecutor’s office. He was not immediately available for comment.

Kakao Corp. is best known for its hugely popular local mobile chat app called Kakao Talk. The company has leveraged the popularity of its mobile messenger in recent years to branch out into banking, online shopping and other services.

Kakao’s share price fell nearly 5% on Tuesday.

SM Entertainment’s top executives had objected to Hybe’s attempt to increase its stake in the company, calling it a hostile takeover attempt and saying it would lead to monopolization of the industry and increase costs for fans. They also said SM artists might not receive preferential treatment if Hybe controlled the company.

SM’s top managers had supported Kakao’s takeover offer as “friendly” and described the technology company as an “optimal strategic cooperation partner”.