Kim Bum-soo, founder of Kakao, faced with judicial handling crisis

SM Entertainment’s unprecedented seizure and search by the

Financial Supervisory Service on suspicion ofIn addition to the suspicion surrounding the acquisition of SM Entertainment, it will not be easy for Kakao to respond if piles of judicial risks erupt simultaneously.”

Lee Bok-hyeon, head of the Financial Supervisory Service, “the highest level of sanctions for illegal acts”The prosecution and the Financial Supervisory Service (Financial Supervisory Service) are targeting Kim Bum-soo, founder of Kakao (Director of Kakao Future Initiative Center), in connection with the suspicion of market manipulation in the process of buying Kakao’s stake in SM Entertainment (SM Entertainment ) . On August 10, the Financial Supervisory Service Capital Markets Special Judicial Police (Special Police) raided the office of Center Manager Kim in the Kakao office building in Seongnam City, Gyeonggi Province. It is said that the search and seizure items, which were carried out under the direction of the Seoul Southern District Prosecutor’s Office, included the personal cell phone of Center Director Kim. Regarding Kakao’s suspicion of price manipulation, the financial authorities conducted a search and seizure of the offices of Kakao and Kakao Entertainment on April 6 and SM Entertainment’s headquarters on the 18th of the same month . The point of the sword of the investigative authorities, which had been heading towards Kakao and its affiliates, is now aimed at the owner, Center Manager Kim.

There is also a view that the prosecution and financial authorities have captured the circumstances of Kakao’s top executives’ involvement in market manipulation. It is said that the fact that the FSS did not simply request the submission of documents, but that the seizure and search itself shows strong confidence in proving the allegations. An attorney with experience working for the FSS said, “It is not uncommon for the FSS to conduct a search and seizure directly, and it is common for the FSS to request only the submission of documents from the company during the investigation process and then hand over the full-scale investigation to the prosecution.” It seems that the authorities are taking stronger measures compared to the usual market manipulation cases.” He analyzed, “It is highly probable that the FSS and the prosecution specifically captured various circumstances that could prove the allegations before the seizure and search.”

cacao isIn the process of securing a stake in SM Entertainment, he is suspected of interfering with the stock tender offer of Hive, an entertainment agency that was a competitor. Hive is accused of violating the Capital Markets Act by artificially intervening in stock price fluctuations in February when it tendered SM Entertainment stocks. At the time, Hive failed in a tender offer and Kakao, which secured shares in SM Entertainment, became the largest shareholder. Hive, who took issue with this, submitted a complaint to the Financial Supervisory Service, stating, “On February 16, at the Pangyo branch of IBK Investment & Securities, there was an abnormal purchase of 2.9% of the shares issued by SM Entertainment.” Regarding the investigation into Kakao’s market manipulation allegations, Financial Supervisory Service Commissioner Lee Bok-hyeon met with reporters on July 17, saying, “I have some confidence in identifying the substance,” and “if illegal acts are found, I will impose the highest possible level of sanctions.” have said

An official from Kakao said in a phone call on August 16th, when a reporter asked about the position on the suspicion of price manipulation and the recent search and seizure by the Financial Supervisory Service, he said, “There is no particular position.”

Kakao’s constant internal and external exchangesRecently, in the IT (information technology) industry, it is widely said that the morale of Kakao executives and employees has dropped significantly. This is because management, including center manager Kim, faced legal risks following deteriorating performance and massive staff reduction. There are three major causes of the crisis that are mentioned inside and outside the company.

The first is the unreasonable expansion of the octopus kicking business, which caused controversy over the infringement of alley business rights. The suspicion of market manipulation of SM Entertainment , which led to a recent seizure and search, is also a controversy that arose in the process of taking over a large entertainment agency. The second is the controversy over the exercise of large-scale stock options surrounding management. Former CEO of Kakao Pay, Ryu Young-joon, voluntarily resigned in January of last year after receiving strong criticism for selling a large amount of stocks acquired through stock options (stock options) immediately after listing on Kakao Pay. Recently, former Kakao CEO Nam Gung-hoon, who stepped down in October of last year, was found to have gained 9.4 billion won in stock option exercise gains, causing rumors. The exercise of stock options itself is not a problem, but there is public opinion that it is an inappropriate behavior as Kakao stock is weak. The third is various suspicions surrounding the acquisition of SM Entertainment, which recently led to a search and seizure of Center Director Kim’s office . As Kakao failed to respond promptly to a series of crises, the risk increased.

Kakao, which was once in the limelight as an icon of innovation, is his main business, ITThe fact that it is unable to find a new growth engine in the field also adds to the crisis. Regarding the recent Kakao crisis, Wi Jeong-hyeon, a professor of business administration at Chung-Ang University, pointed out that it is ‘internal and foreign exchange’. Professor Wi said, “I am concerned that Kakao may have lost its growth engine , even if we leave aside so-called external variables such as the judicial risk related to Center Director Kim. ” It is a considerable crisis that Center Director Kim is involved in a judicial risk amid growing uncertainty about future business, such as being at a level.” He added, “It is also a big problem that Kakao’s corporate image has been continuously deteriorating and has become a ‘national hatred’.” Excessive business expansion is cited as the main reason why Kakao heard the word ‘national hatred’. The number of Kakao subsidiaries was 147 as of May, the second highest after SK (198) among the top 30 domestic conglomerates. The reason why Kakao’s business expansion is particularly criticized is that it is concentrated in the domestic market, which is called the small alley compared to other conglomerates. An expert familiar with the situation in the IT industry said, “I had a chance to observe Kakao’s response immediately after the chat GPT boom, and unlike the agile response in the past, I got the impression that it was quite dull. “

Kakao’s expansion of the octopus kicking business leads to deterioration in performance and restructuring of non-core affiliates, and is drawing backlash from workers. On August 17, the Kakao Branch of the National Chemical Fiber and Food Industry Labor Union held a rally near the Kakao office building for the ‘second action of the Kakao community to condemn irresponsible management and relieve job insecurity’. After the first rally on July 26, they delivered a letter of protest to center manager Kim, but when they did not receive a response from the management, they took another collective action. Kakao workers argue that “why should workers bear the responsibility for management difficulties caused by excessive business expansion?” Some say that the recent reorganization of Kakao affiliates is a measure to ease the burden ahead of the parliamentary audit season amid the judicial risk of center chief Kim.

In the political world, there are observations that various suspicions surrounding Kakao will rise to the cutting board during this year’s National Assembly audit. Center Director Kim has appeared as a witness in the state audit in 2018 (portal news editing problem), 2021 (controversy over alley commercial rights infringement), and 2022 (Kakao service malfunction). Every time he was summoned to the Director General, he was reprimanded for Kakao’s expansion of the octopus feet business, and center manager Kim promised, “I will never enter a business that infringes on the alley busines토토사이트s” and “I will thoroughly review the expansion of octopus legs and unnecessary investments.” In April of last year, Kim Seong-soo, chairman of the Kakao Board of Directors at the time, announced that he would reduce about 30 affiliates, but the actual affiliate ‘diet’ fell short of the target.

Responding to new businesses seems to be at a loss, but I think it is because I have grown too big into businesses that have nothing to do with my main job, such as an entertainment agency.”

Police investigation of core affiliates, penalty bomb crisisIn addition to Kakao, other core affiliates have recently faced legal risks one after another. Kakao Pay has been under investigation by the police due to suspicions of receiving illegal subsidies. The Seoul Metropolitan Police Agency’s Anti-Corruption and Public Crime Investigation Unit raided the headquarters of Kakao Pay in Seongnam, Gyeonggi Province on July 3. In the process of recruiting offline affiliates, Kakao Pay is accused of violating the Specialized Credit Financial Business Act by indirectly receiving funds from Nice Information & Communications, a value-added communication network ( VAN ) company. In this case, the suspicion of rebate of Kakao Pay was caught during the regular inspection of the Financial Supervisory Service, and the investigation was requested to the police.

Kakao Mobility is in danger of being hit by a penalty bomb from the Fair Trade Commission (Fair Trade Commission). The Fair Trade Commission imposed a penalty of 27.1 billion won on the grounds that Kakao Mobility discriminated against non-affiliated taxis by directing passenger calls to Kakao T Blue, its affiliated taxi. The Fair Trade Commission’s judgment is that Kakao Mobility manipulated the taxi dispatching algorithm. Kakao Mobility filed an administrative lawsuit against the Fair Trade Commission’s corrective order. In August, the city of Daegu submitted a report to the Fair Trade Commission, saying, “Kakao Mobility is charging excessive fees by using its monopoly position in the taxi calling app market.”

Judicial risks are also casting a shadow over Kakao’s entry into new businesses. In May, the Financial Services Commission suspended review of Kakao Bank’s My Data and non-financial personal credit evaluation related businesses. The Financial Services Commission’s judgment is that there is a problem with the ‘eligibility of the major shareholder’ as Kakao, the largest shareholder, is under investigation for suspicion of market manipulation.

Kim Bum-soo, a self-made businessman from a dirt spoon, stands at a critical crossroads

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