Kakao Corp. Founder Arrested Amid K-Pop Acquisition Controversy

On Tuesday in Seoul, South Korea, Kakao Corp. founder Kim Beom-su, also known as Brian, was arrested on charges of manipulating SM Entertainment’s stock price during a high-profile acquisition battle. The competition for SM Entertainment involved Kakao’s chief rival, Hybe, the K-pop label famous for BTS. Last year, prosecutors indicted Kakao’s Chief Investment Officer, Bae Jae-hyun, on similar charges. Kim has maintained his innocence.

Kakao Corp. is renowned for its flagship product, KakaoTalk, South Korea’s leading messaging app, used by approximately 47 million of the country’s 50 million residents. Beyond messaging, Kakao’s diverse operations include shopping, banking, music, and ride-hailing, collectively valued at around $12.4 billion USD.

Despite its dominance in South Korea, Kakao’s ambition to acquire SM Entertainment, one of the top three K-pop agencies responsible for popular acts like Girls’ Generation, Exo, NCT, and Aespa, aimed at enhancing its global presence. While Kakao is a household name in Korea, it lacks significant recognition internationally. K-pop’s widespread popularity in Asia and the West presented a strategic opportunity for Kakao.

However, the battle for SM Entertainment was part of a broader, intricate K-pop takeover scandal involving allegations of tax evasion, embezzlement, and the fall of the so-called “godfather of K-pop.” Ultimately, Kakao secured a majority stake in SM by investing $963 million.

Kim’s arrest holds symbolic significance as he represents a rare self-made billionaire among Korea’s elite, diverging from the traditional family-run conglomerates such as Samsung, Hyundai, SK Group, and LG that dominate South Korea’s economy.

Kakao’s aggressive pursuit of market dominance has drawn increased government scrutiny, particularly after a 2022 data center fire led to a five-day nationwide outage, raising concerns about Korea’s reliance on a few tech companies. The company has since been under investigation for tax evasion and has seen its value plummet by a third this year, with Kim’s personal fortune declining by roughly $10 billion.

This latest scandal underscores the risks associated with Kim’s power-driven strategies during one of the decade’s most significant K-pop controversies. Kim’s journey from poverty to becoming the first in his family to attend college and eventually surpassing Samsung heir Lee Jae-Yong as South Korea’s richest man with an estimated fortune of over $13 billion epitomizes a classic rags-to-riches story.

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