Photo credit: Kim Beom-su

In a dramatic twist for the South Korean tech world, Kim Beom-su, the founder of Kakao Corp., was arrested on Tuesday on charges of stock price manipulation during Kakao's high-profile takeover of K-pop giant SM Entertainment last year.

Following a hearing at the Seoul Southern District Court, an arrest warrant was issued for Kim, who now faces allegations of rigging SM's stock prices to secure the takeover. The court expressed concerns about the possibility of Kim fleeing or destroying evidence, leading to his detention.

This case revolves around claims that Kakao and its top executives manipulated SM's stock prices amid a fierce bidding war with Hybe, the parent company of BTS' management agency BigHit. Prosecutors allege that Kakao drove SM shares above 120,000 won ($86) each, the price at which Hybe was publicly buying shares from investors. By purchasing 240 billion won worth of SM shares at inflated prices on 553 occasions, Kakao is accused of undermining Hybe's takeover bid for SM.

Hybe initially secured a 14.8 percent stake in SM from its founder Lee Su-man and made an offer to buy more shares from small shareholders at 120,000 won per share. However, as SM's stock prices soared, Hybe withdrew its bid. By March last year, Kakao and its entertainment arm had gained a controlling 39.87 percent stake in SM Entertainment.

Kim Beom-su has denied any wrongdoing, stating during a recent meeting of Kakao affiliates, "I believe the truth will eventually be revealed, because I have never instructed or condoned any illegal acts." He also claimed that while he was aware of plans to purchase SM shares, he was not informed about the specific details.

Meanwhile, Kakao's Chief Investment Officer Bae Jae-hyun and the company itself have already been indicted on charges of stock manipulation.