Kakao founder Kim Beom-su questioned by FSS

[Photo by Yonhap]

Kim Beom-su, the founder of South Korean platform giant Kakao Corp. and head of the company’s Future Initiative Center, was questioned by the financial watchdog on Monday over alleged stock manipulation in Kakao’s purchase of SM Entertainment Co.

Kim arrived at the Financial Supervisory Service (FSS) on Monday and stood in front of the press line. He was summoned in connection with allegations that Kakao invested 240 billion won ($178.7 million) to boost SM Entertainment’s stock price and hinder its competitor Hybe Co. in the race to the entertainment agency.

“I will cooperate with the investigation,” Kim told the reporters when asked whether he admits to the stock price manipulation allegations.

Once a national icon of innovation, the scrutiny on Kim saw an unusual press line form at the entrance of the FSS building. The Capital Market Special Law Police of the FSS is now focused on the extent of Kim’s involvement in the alleged stock price manipulation.

It was Kim’s first public appearance after he attended a National Assembly audit in October 2022. At the time, he was summoned by the lawmakers due to the unprecedented crisis involving Kakao’s service blackout.

Industry insiders noted that Kakao is facing another crisis after having achieved rapid growth over the years. With its 144 subsidiaries, insiders note Kakao needs to make improvements in its corporate culture, including social responsibility.

According to Kakao disclosures in the first half of 2023, Kakao subsidiaries were hit with 16 sanctions from the government.

Kakao Mobility was given a corrective order from the Fair Trade Commission for discriminating against regular taxis while providing taxi dispatch services.

SM Culture & Contents received a fine from the Korea Communications Commission for broadcasting advertisements without the explicit consent of the recipients.

In the meantime, Kakao shares are on a downward trend, hitting a new 52-week low.

“There is a high level of market concern that Kim and Kakao’s internal control tower have not functioned properly,” an industry insider said. “There is a high probability that Kim could be held responsible simply because he wanted to expand the company.”