Legal

Kakao founder wanted by authorities after rigged stock price allegations

Seoul Southern District authorities are seeking a warrant for Kim Beom-su’s arrest

Featured Image: 호로조/CC BY-SA 4.0

Prosecutors in South Korea are seeking a warrant to arrest Kakao founder Kim Beom-su after allegations that he manipulated the stock market value of K-pop giant SM Entertainment during last year’s bidding war with Hybe Co.

SM Entertainment operates as a record label, talent agency, and music production company and represents several K-pop artists.

The Seoul Southern District is seeking to detain billionaire Kim after conducting a probe into alleged price-rigging that took place during a bidding war for SM Entertainment last year.

A spokesperson for the District’s prosecutors’ office confirmed that it has asked courts to issue an arrest warrant over charges related to the capital markets law, as reported by Bloomberg.

The court is now set to determine whether to issue the warrant after a hearing.

A representative for Kakao denied the allegation and said that no illegal activities had taken place during the acquisition of SM Entertainment.

On August 1 last year, SM announced that it would form a joint venture division with Kakao in North America after the latter won a bidding war against Hybe Co., the label behind boyband BTS.

As a result, Kakao owns 20.97% of the company, its subsidiary Kakao Entertainment has 19.41%, Hybe owns 12.58% and the rest is distributed between other parties.

Financial regulators are accusing Kakao executives of buying ₩240bn in shares of SM Entertainment in an attempt to disrupt Hybe’s offer.

They claim that the shares were privately purchased at prices above Hybe’s tender price offer on 553 occasions.

Hybe was then forced to withdraw its offers to the smaller shareholders after seeing prices take a significant jump.

Allegedly, the company’s stock rose to as much as ₩120,000 (£66/$86/€79).

Kakao provides a diverse set of services including messaging apps, music streaming, fashion, banking, and transportation.