Korean prosecutors file warrant to arrest Kakao founder for inventory manipulation | TechCrunch

South Korean prosecutors mentioned on Wednesday that they’ve filed an arrest warrant for Brian Kim, the founding father of Korean web large Kakao, as a part of an investigation into alleged inventory market manipulation associated to a high-profile bidding battle for SM Entertainment, one of many nation’s greatest music labels, in 2023.

The warrant comes every week after Seoul-based prosecutors launched a probe into Kim’s involvement within the alleged manipulation of SM Leisure’s share worth.

Kakao didn’t reply to a request for remark forward of publication.

In March 2023, Kakao and Kakao’s subsidiary, Kakao Leisure, became the controlling shareholder in SM Entertainment after profitable a bidding battle for a 39.9% stake within the Okay-pop label. Kakao was competing with Hybe, the proprietor of South Korean music company BigHit, identified for signing the favored Okay-pop boy band, BTS. Kakao had launched a young supply to purchase SM Leisure’s shares at 150,000 KRW ($115) every, eclipsing an earlier tender supply by Hybe priced at 120,000 KRW (~$87) per share.

A young supply is when an organization goes on to a goal firm’s shareholders to purchase their shares inside a set interval. The target of a young supply is normally to take management of the goal firm, and the success of such a proposal typically is determined by the client acquiring a sure share stake.

Korean prosecutors suspect that the worth of SM Leisure’s shares was manipulated proper earlier than the deal was closed. Kakao is reportedly accused of buying KRW 240 billion (roughly $174 million) of SM Leisure’s shares over 553 trades in February 2023. That allegedly drove the corporate’s share worth above Hybe’s tender supply worth of 120,000 KRW per share, which triggered Hybe to withdraw its supply.

Kakao can be accused of not reporting the massive inventory purchases to monetary authorities.

Kakao’s chief funding officer, Jae-Hyun Bae, was arrested final October following allegations of inventory worth manipulation after the takeover. He’s at present on trial.

Following Kakao’s acquisition of SM Leisure final March, Hybe offered off a portion of its stake within the company to Kakao, decreasing its possession to eight.8% from 15.8%.

Based in 2006, Kakao is certainly one of South Korea’s greatest web corporations. It operates well-liked messaging service Kakao Discuss, on-demand taxi service Kakao Mobility, on-line banking platform Kakao Financial institution, music streaming service Melon, and comics internet hosting platform Kakao Webtoon.

If Kakao’s chief data officer and different executives at Kakao Leisure are discovered to be in violation of South Korea’s Capital Markets Act and incur larger penalties than a wonderful, the nation’s monetary regulator may compel Kakao to divest no less than 10% of its possession in its on-line banking subsidiary, Kakao Financial institution.

In keeping with South Korea’s on-line banking rules, with the intention to have greater than 10% of the voting rights in mobile-only banks, non-financial corporations should not have breached monetary legal guidelines, such because the Capital Markets Act, or truthful commerce legal guidelines within the final 5 years.