South Korean prosecutors have announced that they will launch a “full-scale investigation” into the former CEO of Kakao, one of the country’s leading technology companies. The investigation comes in response to claims of crypto “embezzlement” made against the company and its executives.
Allegations of Embezzlement and Breach of Trust
The case, which will be handled by the Seoul Southern District Prosecutors’ Office’s Virtual Asset Crime Joint Investigation Unit, will focus on the founder and former CEO of Kakao, Kim Beom-su, and other high-ranking executives. They have been accused of embezzlement, breach of trust, and conducting fraudulent transactions in violation of the Capital Markets Act.
A civic group called Economic Democracy 21 filed a legal case against Kim and other officials, alleging that they engaged in “illegal profits” through illicit transactions involving the company’s cryptocurrency, KLAY. The group claims that coins were sold to investors during a private pre-sale event and the money was embezzled instead of being used as intended.
Misappropriation and Insider Trading
Economic Democracy 21 further alleges that Kim and others may have misappropriated up to $223 million. They also accuse certain officials of insider trading, with Klaytn managers accused of siphoning off cryptoassets. The group claims that these actions took place when Klaytn, a blockchain platform operated by Kakao, was seeking to become the leading player in East Asia.
Kakao, which operates the popular KakaoTalk chat app and a crypto exchange-partnering neobanking operation called KakaoBank, has been asked for time to conduct internal investigations into the allegations. However, spokespeople for Kakao, Klaytn, and Crust, Kakao’s blockchain subsidiary, have expressed that the claims are inaccurate.
“A small group of Kakao insiders” made “illegal profits” via illicit KLAY transactions. This, they claim, was mainly done by selling coins to investors, and then “embezzling the money instead of using it for its intended purpose.”
As the investigation begins, prosecutors have summoned Kim Kyeong-yul, the head of Economic Democracy 21, to provide additional information regarding the allegations. It remains to be seen how the case will unfold and what the implications will be for Kakao, one of South Korea’s biggest tech firms.
