South Korean court approves arrest warrant for Kakao founder

SM Entertainment Co

22/07/2024 23:08

* 
      Kakao founder Kim accused of manipulating SM Entertainment
stock
to hinder Hybe acquisition
    

        * 
      Kim denies accusations, stating no illegal activity was
ordered
or tolerated
    

        * 
      Kakao shares down 24% YTD; regulatory scrutiny may impact
AI and
expansion plans
    

  
    By Joyce Lee
       SEOUL, July 23 (Reuters) - A South Korean court approved
early on Tuesday a prosecution request for a warrant to arrest
Brian Kim, the billionaire founder of tech giant Kakao Corp
 035720.KS , on accusations of stock manipulation during a 2023
acquisition. 
    It is the latest legal twist for Kakao after the company and
an executive went on trial last year for alleged wrongdoing
during the same acquisition. 
    This is also one of the biggest potential risks faced by
Kim, who is seen as a visionary in South Korea's digital
industry for building Kakao's group of affiliates - worth a
total of 86 trillion won ($62 billion) by assets according to
government data - from the ground up since launching its chat
app in 2010. 
    Prosecutors say Kim was involved in manipulation of the
stock price of SM Entertainment  041510.KQ  in February last
year to hinder a competitor, Hybe  352820.KS , from acquiring
the K-Pop agency. 
    Not yet formally charged, Kim has denied the accusations,
saying he has never ordered or tolerated any illegal activity,
the company said in a statement. 
    The high-profile tech entrepreneur is the largest
shareholder of Kakao Corp, with a stake of 24% controlled by him
or affiliated entities. 
    The Seoul Southern District Court approved the warrant to
stem a risk of destroying evidence or absconding, a court
official said. The court ruled only on whether a warrant is
appropriate, and not on the prosecution's allegations. 
    Kim's arrest would last up to 20 days, during which
prosecutors are expected to investigate further before bringing
charges, according to South Korean criminal procedure. 
    Analysts said the outcome of any case against Kim could also
jeopardise Kakao group's control of online bank arm KakaoBank
Corp  323410.KS , since the country's financial rules restrict
those convicted of financial crime from owning a stake of more
than 10% in a bank.
    Continued regulatory and social scrutiny is also seen making
it tougher for the operator of South Korea's largest chat app to
make major decisions on investments in artificial intelligence
(AI) and overseas business expansion, they said. 
    The company plans to introduce new AI services this year.
Kakao Corp shares have fallen 24% year-to-date. 
    Kim heads a "corporate alignment" council that coordinates
the interests of the Kakao group's 128 affiliates and decides
what businesses to concentrate on. 
 ($1=1,389.2700 won)
    

 (Reporting by Joyce Lee in Seoul; 
Editing by Ed Davies, Clarence Fernandez and Matthew Lewis)
 ((joyce.lee@tr.com;))