Founder of Kakao Corp. Arrested in Stock Price Rigging Scandal

South Korean prosecutors have arrested Kim, the founder of Kakao Corp., for alleged stock manipulation during the acquisition of K-pop agency SM Entertainment. Kim is accused of inflating stock prices to block a takeover by Hybe Corp. Kakao expressed regret but did not directly address Kim's arrest.

South Korean prosecutors announced on Tuesday the arrest of Kim, founder of technology giant Kakao Corp., on allegations of stock price rigging during his company’s acquisition of major K-pop agency SM Entertainment last year.

The Seoul Southern District Court approved the arrest warrant, citing fears that Kim might flee or destroy evidence. Prosecutors now have up to 20 days to investigate and determine whether to indict him. A senior prosecutor, requesting anonymity, confirmed Kim’s orchestration of schemes to collaborate with a private equity fund, inflating SM Entertainment's stock to block Hybe Corp. from the acquisition.

Kim, 58, denied the allegations, while another Kakao executive and the head of the equity fund have already been indicted. Kakao Corp., known for its popular Kakao Talk app with 41 million South Korean users, expressed regret over the situation but did not address Kim’s arrest directly. Following the announcement, Kakao's stock price dropped by over 5 percent. SM Entertainment executives had deemed Hybe’s acquisition move hostile and supported Kakao’s tender offer as a friendly alternative, considering them the optimal strategic partner.