Kakao founder Brian Kim charged with stock manipulation in landmark case

SEOUL – South Korean prosecutors have indicted Kakao founder Brian Kim on charges of stock manipulation, kicking off a watershed case that has transfixed South Korea’s young internet industry.

Prosecutors formally charged the entrepreneur with market violations during his company’s takeover battle for K-pop agency SM Entertainment, Yonhap news service reported on Aug 8.

Kim, 58, was allegedly involved with an attempt to buy and push SM stock above a rival offer of 120,000 won (S$116) from BTS-agency Hybe, the agency reported. Executives carried out that alleged manoeuvre over a total of four days, in mid-February 2023 as well as later that month, Yonhap said, citing prosecutors.

The billionaire, who created South Korea’s dominant social media platform, is at the centre of one of the country’s most sensational corporate cases in years.

Kim was arrested in July for his suspected involvement in that alleged scheme. That made him the highest-profile tech executive behind bars since prosecutors went after Samsung Electronics’ Mr Jay Y. Lee.

The outcome of the case could have serious implications for the US$25 billion (S$33 billion) business empire spanning several listed firms and a plethora of internet spheres.

Kakao had pursued the deal to secure the content it needed to extend its dominance in markets from music and ride-hailing to shopping. Instead, it triggered legal scrutiny and raised questions about the future of budding innovators as they challenge the country’s conglomerates.

For Kim, who has denied wrongdoing, it is a stunning turn after reaching a peak fortune of US$14.4 billion and earning his place as South Korea’s richest person. As at this week, that had dropped to about US$3.4 billion, according to the Bloomberg Billionaires Index.

His arrest also reflects a shift in attitude in South Korea. 

Kim and fellow entrepreneurs such as Coupang chief executive Bom Kim were once hailed as pioneers who prevailed against Silicon Valley titans as they created a Korean-centric internet – a high-growth, splashier alternative to the steel firms, chipmakers and shipbuilders that power South Korea’s economy. 

But as their influence grew, government officials became concerned about the way internet services were displacing smaller merchants and incumbents in banking, retail and entertainment.

A widespread outage after a fire at a data centre in 2022 exposed how much of the population relied on Kakao for basic needs such as news and commerce. BLOOMBERG