South Korean Tech Giant, Kakao, Faces Turmoil as Founder Arrested

News Asia 360

South Korea’s tech scene was shaken this week with the arrest of Brian Kim, the billionaire founder of Kakao Corp.

The popular messaging app giant finds itself in hot water as Kim faces accusations of stock manipulation during a 2023 acquisition deal. This isn’t the first hurdle for Kakao – the company and another executive are already on trial for alleged misconduct surrounding the same deal.

Kim, a revered figure in the Korean tech industry for building Kakao’s vast network of subsidiaries from the ground up, now faces a potential career-defining legal battle. Prosecutors suspect Kim of manipulating the stock price of SM Entertainment, a K-Pop agency, last year.

Their reasoning? To thwart a competitor, Hybe, from acquiring SM. Kim maintains his innocence, claiming he never authorized or tolerated any illegal activity within the company.

The arrest holds significant weight for Kakao beyond Kim’s personal reputation. As Kakao’s largest shareholder, Kim’s potential conviction could jeopardize the company’s control of its online bank, KakaoBank Corp.

South Korean financial regulations restrict those convicted of financial crimes from holding a significant stake in banks.

Even if Kim avoids conviction, the ongoing legal case casts a long shadow. Analysts predict stricter regulatory scrutiny and heightened social pressure could significantly impact Kakao’s future decisions.

The company, aiming to launch new AI services this year, might face roadblocks in its investments in artificial intelligence and overseas expansion plans. This uncertainty, coupled with the ongoing trial, has already taken a toll on Kakao’s stock price, which has dipped 24% so far in 2024.

Image—Forbes Australia

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