Kakao Corp., South Korea’s biggest messenger operator, is confronting a major crisis after founder Kim Beom-su’s arrest Tuesday for alleged stock price manipulation related to last year’s takeover of K-pop powerhouse SM Entertainment.

The incident opens up the potential of a leadership vacuum at Kakao, raising concerns about the impact on its sprawling affiliates as well as its restructuring and growth plans in the tech sector amid intensifying competition in artificial intelligence.

Kakao’s fall from grace could bring some of its ambitious expansion plans to a halt or delay key business decisions in a way that sends shocks to the country’s broader IT sector. Kakao, which runs messenger app KakaoTalk and has 124 affiliates, is widely regarded as one of the country’s top two tech giants, alongside Naver.

The Seoul Southern District Court approved an arrest warrant for Kim after a hearing that follows weeks of questioning about his alleged role in manipulating SM shares.

At the heart of the high-profile investigation is whether the mobile heavyweight and its executives, including Kim, artificially inflated the price of SM shares during a bidding war with Hybe, the entertainment corporation behind K-pop sensation BTS.

Prosecutors allege that Kakao purchased 240 billion won ($173 million) of SM shares at prices higher than Hybe’s offer on 553 occasions in February last year in an attempt to thwart Hybe’s takeover attempt. Hybe, which had secured a 14.8 percent stake in SM Entertainment from its founder Lee Su-man, wanted to buy additional shares from minor shareholders at 120,000 won per share, but decided to pull out of the race after the SM share price rose.

Kakao and Kakao Entertainment assumed control of SM Entertainment by acquiring a 39.87 percent stake in the company in March last year.

Kim, a self-made billionaire and first-generation entrepreneur, denied the allegations of illegal activities last week, saying, “I believe the truth will eventually come out.”

It remains uncertain how the investigation will play out at this point. What’s certain, though, is that Kim’s troubles will undermine Kakao’s corporate reputation, delay the launch of its new AI service and affect its affiliates one way or another. Kim is the largest shareholder of Kakao Corp., and if Kim were found guilty and sentenced to a jail term, Kakao could lose its largest stockholder position in online-only lender Kakao Bank for regulatory reasons.

It is also shocking to many industry watchers who have witnessed the meteoric rise from a tech venture to the 15th-largest conglomerate in the country, only to face a make-or-break corporate challenge.

Aside from the SM stock price manipulation case, Kakao’s rapid expansion into various businesses through aggressive mergers and acquisitions had invited much dispute, especially regarding its relentless intrusion into markets served by small businesses ranging from flower shops to hair salons. Some Kakao executives were also involved in stock option disputes, raising questions about the standard of ethics within the corporation.

Under pressure from the government and the public, Kakao promised to streamline the structure of its affiliates in 2021, but it is still seen to be operating too many affiliates. Whenever a dispute has arisen, Kakao has pledged to overhaul its corporate structure and changed the official position of Kim. But it continued to depend on mergers and acquisitions for expansion and focused on managing its stock price rather than seeking innovative and tech-driven changes.

To weather the current crisis, Kakao has to reshape itself by reviving its “venture entrepreneurship,” the very hallmark of innovation that it has long neglected.