South Korea’s richest self-made billionaire arrested

The acquisition of entertainment company SM Entertainment last year was the reason why Kim Beom-su, the founder of Kakao, was arrested by the authorities.

Kim Beom-su was arrested on suspicion of stock manipulation. Photo: Yonhap.

Yonhap News reported that Kim Beom-su, the founder of technology group Kakao Corp, was arrested on the morning of July 23 on charges of stock manipulation. Prosecutors said the case was related to the takeover of Kpop’s leading entertainment company, SM Entertainment, in 2023.

The Seoul South District Court issued an arrest warrant for Kim Beom-su after holding a hearing a few weeks ago. Prosecutors questioned the “tech tycoon” about allegations related to the manipulation of SM shares.

The court cited the risks of the businessman being able to flee and destroy evidence.

Hype and Kakao are rivals in the battle to acquire SM Entertainment in 2023.

The case focuses on the suspicion that the technology corporation and senior executives manipulated SM’s stock price in a bidding war in February 2023. Kakao’s rival in that deal is Hybe, the parent company of BigHit, the management unit of the global group BTS.

According to the indictment, SM stock was “inflated” to rise to 120,000 won ($86) through manipulation. The prosecutor suspects that Kakao spent 240 billion won to acquire SM shares higher than the asking price from Hype. This was intended to sabotage the opponent’s attempt to take over SM.

Hype bought 14.8% of SM’s ownership from founder Lee so-man. At the same time, the group wants to acquire shares from a group of small investors at 120,000 won per share. However, immediately after the proposal was made, SM stock price traded on the market increased sharply. Hype was forced to cancel the acquisition proposal.

A month later, Kakao and Kakao Entertainment became controlling shareholders of SM Entertainment thanks to the acquisition of 39.87% ownership of the business.

The founder of Kakaotalk completely denies the allegations. “I believe that the truth will eventually come out. I have never directed or tolerated any illegal behavior,” Kim said during the meeting last Thursday.

According to Yonhap News, during the previous interrogation, Kim Beom-su reportedly admitted that he knew about the plan to buy SM shares, but did not know the specific procedure. Prosecutors had earlier charged Bae Jae-hyun, Kakao’s chief investment officer, with the same charges.

Kim is famous for being a self-made billionaire. The 58-year-old entrepreneur founded Kakao and grew the company into South Korea’s 15th largest business. The group has 128 affiliated companies with total assets worth 35.1 trillion won ($25.3 billion).