Kakao founder Kim Bum-soo was arrested in Seoul, South Korea, on Tuesday. It may not mean much to Westerners, but it’s the bizarre story of how a self-made tech billionaire with a reputation for being the butt of a scandal-ridden K-pop agency came to ruin.
Kim, also known as Brian, is accused of manipulating SM Entertainment’s share price in a high-profile bidding war. Kim’s biggest rival in the bidding war is Hybe, the K-pop label best known for BTS. Prosecutors indicted Kakao’s chief investment officer, Bae Jae-hyun, on similar charges last year. Kim denies any wrongdoing.
A little background: Kakao is best known for KakaoTalk, South Korea’s most popular messaging app, used by around 47 million of the country’s 50 million people. It could be considered the Korean version of WhatsApp, but Kakao is not just a messaging platform. The company has dozens of affiliates that handle everything from shopping and banking to music and ride-hailing. The company is currently valued at around 17 trillion Korean won, or $12.4 billion.
You might wonder why Kakao would risk financial crime by acquiring a K-pop company if it was already so dominant, but SM Entertainment is more than just a label: it’s one of the big three K-pop agencies, with hit artists like Girls’ Generation, EXO, NCT, and Aespa.
Symbolically, Kim’s arrest is significant because he is one of the few self-made billionaires among South Korea’s elite. In other words, he is not from a chaebol family. In South Korea, chaebols are family-run conglomerates such as Samsung, Hyundai, SK Group, and LG. These conglomerates often dominate the Korean economy at the expense of smaller businesses. In contrast, Kim is a classic rags-to-riches figure, having grown up in poverty and being the first in his family to go to college. At his height, Kim surpassed Samsung heir Lee Jae-yong to become South Korea’s richest man, with a fortune estimated at more than $13 billion.
In all seriousness, Kakao’s aggressive pursuit of a monopoly is what really got Kakao and Kim in trouble. The company has come under increased government scrutiny since a Kakao data center fire in 2022 caused a five-day nationwide blackout and raised concerns about South Korea’s reliance on a handful of tech companies. Since then, Kakao has also been investigated for tax evasion. BloombergCocoa has also lost a third of its value this year alone, and Kim’s own net worth has dropped by about $10 billion.
But it probably didn’t help that Kim’s hunger for power has only intensified a bit in the wake of one of the worst K-pop scandals of the decade.
