Kim Beom-su, center, the founder of Kakao, heads toward a courtroom for a hearing at the Seoul Southern District Court in the capital, July 22. Yonhap

The founder of Korean tech giant Kakao was arrested Tuesday on charges of stock price manipulation related to the firm's takeover of K-pop powerhouse SM Entertainment last year, prosecutors said.

The Seoul Southern District Court issued an arrest warrant for Kim Beom-su after holding a hearing, which came weeks after prosecutors questioned the tycoon about his alleged involvement in the manipulation of SM shares.

The court cited risks of him fleeing and destroying evidence.

The case centers on suspicions that the mobile platform-to-entertainment conglomerate and its executives manipulated SM stock prices during a bidding war it won in February last year against HYBE, the parent company of K-pop superband BTS' management agency BigHit, over the takeover of SM.

SM shares were allegedly driven above 120,000 won ($86) per share through alleged rigging, the fixed price at which HYBE was publicly buying shares from investors.

Prosecutors suspect Kakao of purchasing 240 billion won worth of SM shares at prices above HYBE's tender offer price on 553 occasions in February last year to undermine HYBE's takeover bid for SM.

HYBE had acquired a 14.8 percent stake in SM from its founder Lee Su-man and offered to buy up SM shares from small shareholders at 120,000 won per share. But it later withdrew its takeover bid after SM shares significantly jumped.

In March last year, Kakao and Kakao Entertainment became the controlling shareholder in SM Entertainment after acquiring a 39.87 percent stake in the agency.

Kim flatly denies the suspicions. During a meeting of Kakao affiliates last Thursday, Kim said, "I believe the truth will eventually be revealed, because I have never instructed or condoned any illegal acts."

During his previous questioning, he reportedly claimed that he had been informed about plans to buy SM shares, but not about the specific purchase procedures.

Prosecutors earlier indicted Kakao's Chief Investment Officer Bae Jae-hyun and the company itself on stock manipulation charges. (Yonhap)