Livedoor was Japan's hottest internet company — then its founder went to prison for fraud

Livedoor was founded by Takafumi Horie in 1995 and grew into one of Japan's most prominent internet companies, operating a web portal, blog platform, and ISP. It went public on the Tokyo Stock Exchange's Mothers market in April 2000. Horie, a charismatic young entrepreneur, became a celebrity in Japan — a symbol of the new economy challenging the old establishment.

The scandal broke on 16 January 2006, when Tokyo prosecutors raided Livedoor's offices and Horie's home on suspicions of securities fraud. Prosecutors alleged that Livedoor had falsified financial statements to hide losses and inflate profits, using its highly valued stock as currency for acquisitions. Horie and four other executives were arrested on 23 January 2006. The stock lost 90% of its value in four months. Livedoor was delisted on 14 April 2006.

On 16 March 2007, Horie was sentenced to 2.5 years in jail. He was also ordered to pay ¥21 billion in a settlement with Livedoor. A class-action lawsuit by 3,340 investors resulted in a final ruling of ¥7.6 billion against the company. The scandal was a watershed moment for Japanese corporate governance, exposing the risks of aggressive stock-swap M&A and lax financial oversight.