South Korea’s Political Crisis: The Kim Keon Hee Scandal and Its Regional Impact - Maxthon

Executive Summary

South Korea faces an unprecedented political crisis as former first lady Kim Keon Hee stands trial for bribery and corruption charges while her husband, ousted President Yoon Suk Yeol, faces insurrection charges stemming from his failed December 2024 martial law declaration. The dual scandals have triggered significant economic uncertainty, with foreign investors growing wary of South Korea’s investment climate despite the nation’s critical role in global semiconductor supply chains and its deepening strategic partnerships, including with Singapore.

Special prosecutor Min Joong-ki announced that Kim took advantage of her position as the president’s spouse to receive money and expensive valuables while being widely involved in various personnel appointments and nominations. The investigation wrapped up on December 28, 2025.

Key charges against Kim:

Kim faces charges including stock price manipulation, accepting bribes for mediation, and violating political fundraising laws Al Jazeera The Korea Times. The specific allegations include:

A stock manipulation scheme between 2010 and 2012 that resulted in illicit profits of over 810 million won CNN
Accepting luxury items such as Chanel bags and a diamond necklace from the Unification Church Al Jazeera
Receiving free opinion polls ahead of the 2021 elections in exchange for securing a party nomination for a candidate Al Jazeera

Current status:

Kim has been in detention since August 12, 2025, when the Seoul Central District Court issued an arrest warrant Al Jazeera Wikipedia. Prosecutors have requested a 15-year prison sentence and a 2 billion won fine The Korea Times. The court verdict is expected on January 28, 2026 The Star.

Kim has denied wrongdoing but apologized for causing public concern The Korea Times. She becomes the first spouse of a former South Korean president to stand trial and be imprisoned on such charges.

The Charges Against Kim Keon Hee

Stock Manipulation and Bribery

Special prosecutor Min Joong-ki announced on December 29, 2025, that Kim Keon Hee systematically exploited her position as the president’s spouse to receive money and expensive valuables while interfering in various personnel appointments and state nominations.

Primary charges include:

Stock price manipulation (2010-2012): Investigators allege Kim orchestrated a manipulation scheme that generated illicit profits exceeding 810 million won
Acceptance of luxury goods: Kim received high-value items including multiple Chanel bags and a diamond necklace from the Unification Church, suspected of attempting to curry favor and influence
Election fraud: Accepting free opinion polls ahead of the 2021 elections in exchange for securing a party nomination for a specific candidate
Political interference: Using her influence to meddle in government personnel decisions and appointments

Current Legal Status

Kim has been in detention since August 12, 2025, when the Seoul Central District Court issued an arrest warrant. Prosecutors have requested a 15-year prison sentence and a 2 billion won fine. The lower court ruling is expected on January 28, 2026.

While Kim has denied all wrongdoing, she apologized to the public during a December court hearing for causing concerns. Assistant special prosecutor Kim Hyeong-geun noted that various people with no common connection visited Kim rather than the president to request favors, providing money and goods in return for realized outcomes.

The Unification Church Connection

The scandal extends beyond Kim to involve Han Hak-ja, leader of the Unification Church, who faces trial for allegedly directing her organization to bribe Kim. The church is suspected of providing luxury items as part of efforts to win political influence, though Han has denied directing these activities.

Yoon Suk Yeol’s Insurrection Charges

The Martial Law Crisis

On December 3, 2024, at 10:27 PM Korea Standard Time, President Yoon declared martial law during a televised address, accusing the opposition Democratic Party of engaging in anti-state activities and collaborating with North Korean communists. The declaration suspended political activities, restricted press freedom, and included orders to arrest political opponents.

The martial law lasted only hours as lawmakers managed to enter the National Assembly and vote 190-0 to lift it. Yoon was impeached by parliament on December 14, 2024, and the Constitutional Court unanimously upheld his removal on April 4, 2025.

Criminal Proceedings

Yoon faces multiple trials with varying levels of severity:

1. Insurrection charges (most serious):

Orchestrating the martial law declaration to disrupt constitutional order
Deploying military personnel to the National Assembly and National Election Commission
Ordering power and water cuts to media outlets including broadcaster JTBC
Potentially facing life imprisonment or death penalty

2. Obstruction of justice trial (first to conclude):

Blocking investigators from detaining him in January 2025
Violating rights of nine Cabinet members excluded from martial law planning
Drafting and destroying revised martial law proclamations
Prosecutors seeking 10-year sentence
Verdict expected January 16, 2026

3. Additional charges:

Ordering drone flights over North Korea to provoke tensions
Manipulating investigation into a marine’s 2023 drowning death
Receiving free opinion surveys in exchange for political favors
Committing perjury in his prime minister’s trial

Yoon’s Defense

Yoon maintains the martial law was a message to the public about a desperate national situation, not an insurrection attempt. He argues the declaration was constitutional and intended to protect freedom and democracy against opposition paralysis of state affairs. However, prosecutors contend he plotted for over a year to impose martial law to eliminate political rivals and monopolize power.

Historical Context

Kim Keon Hee and Yoon Suk Yeol represent an unprecedented case in South Korean presidential history. Kim is the first spouse of a former South Korean president to stand trial and be imprisoned on criminal charges. Yoon became the first sitting president to be arrested when taken into custody in January 2025.

The couple’s legal troubles follow a pattern of former South Korean presidents facing criminal prosecution, including Chun Doo-hwan, Roh Tae-woo, Lee Myung-bak, and Park Geun-hye. However, the simultaneous trials of both a former president and first lady represent uncharted territory for South Korean democracy.

Economic Impact on South Korea

Immediate Market Reactions

The political crisis has triggered significant economic turbulence:

Currency depreciation: The Korean won reached 1,480 won per US dollar on December 27, 2024, the highest rate in 15 years
Capital flight: Foreign investors sold off more than $700 million in stocks from December 4-6, 2024, immediately after martial law
Consumer sentiment collapse: The Consumer Sentiment Index dropped from 100.7 in November 2024 to 88.4 in December, a decline of 12.3 points
Job losses: South Korea lost 52,000 jobs in December 2024 year-over-year, the first decline in nearly four years

Revised Growth Projections

Multiple institutions have downgraded South Korea’s economic outlook:

Bank of Korea: Reduced 2025 growth forecast to 1.6-1.7%, down from 1.9% projected in November 2024
South Korean government: Projects export growth may slow to just 1.5% in 2025
OECD: Maintained 2.1% growth projection for 2025 but noted heightened uncertainty
IMF: Highlighted that prolonged domestic political instability could weigh on private investment decisions and consumer sentiment

The economy showed minimal growth in Q4 2024, expanding just 0.1% quarter-on-quarter, resulting in full-year growth of only 2.0%, below expectations.

Structural Challenges

Beyond the political crisis, South Korea faces deeper structural issues:

Competition from China: Major industries like steel and petrochemicals struggle against Chinese overcapacity and surging exports. Anti-dumping investigations against China nearly doubled from four in 2023 to seven in 2024
Trade dependency shifts: Exports to China dropped from 25% to 19.5% of total exports in 2024, while US exports rose from 12-13% to 18.7%
Investment climate concerns: High labor costs, rigid employment protections, and burdensome regulations deter foreign investment
Regulatory complexity: Foreign investors cite South Korea’s complicated, opaque, and country-specific regulatory framework as a major challenge

Foreign Investment Trends

The crisis has significantly impacted foreign direct investment (FDI):

Foreign portfolio investment remains substantial at 32.7% of KOSPI stocks and 10.3% of KOSDAQ as of July 2025
However, 2025 is projected to see the lowest FDI since 2019
The “Korea Discount” has widened, with market valuations remaining depressed
Family offices and institutional investors express growing concerns about regulatory unpredictability

President Lee Jae Myung, who assumed office in June 2025 following Yoon’s impeachment, has pledged to restore public trust, stabilize governance, and revitalize the economy through regulatory reform and targeted support for strategic industries including green energy, advanced technology, and artificial intelligence.

Singapore-South Korea Relations and Impact

Strategic Partnership Milestone

Despite South Korea’s domestic turmoil, bilateral relations between Singapore and South Korea reached a significant milestone in November 2025 when Prime Minister Lawrence Wong and President Lee Jae Myung upgraded ties to a Strategic Partnership, coinciding with the 50th anniversary of diplomatic relations established in 1975.

For Singapore, this positions South Korea alongside other strategic partners including the United Kingdom and Germany. For South Korea, Singapore joins the category of important partners such as the European Union, Mexico, and Turkey.

Economic Ties

Trade relationship:

Singapore and South Korea are among each other’s top 10 trading partners
In 2019, South Korea was Singapore’s 8th largest trading partner
The Korea-Singapore Free Trade Agreement (KSFTA), which entered into force in March 2006, was Singapore’s first FTA with an Asian country
A digital partnership agreement between the two countries entered into force in January 2023

Investment flows:

Bilateral investment continues to rise steadily
Two-way foreign direct investment grew from the late 1990s through the mid-2010s
Singapore-based family offices are increasingly interested in Korean investments, particularly in semiconductors, AI, healthcare, and digital infrastructure

Key sectors of cooperation:

Innovation and technology
Cybersecurity
Green growth and sustainability
Defense technology
Smart cities and fintech
Advanced manufacturing and startups

Recent Institutional Developments

The Singapore Chamber of Commerce in Korea (SingCham Korea), founded just four years ago, has emerged as a key platform for Singaporean businesses operating in Korea. In 2025, the chamber organized several high-level forums including:

Korea-Singapore Investment Forum in partnership with KOTRA and the Foreign Investment Ombudsman
Market-entry seminar for Korean F&B firms expanding to Singapore
Multiple professional networking events and business support services

At the chamber’s December 2025 year-end gala, Singapore Ambassador to Korea Wong Kai Jiun emphasized the growing economic ties and deepening cooperation across multiple sectors.

Singapore’s Strategic Interest

Singapore maintains strong interest in South Korea’s economic trajectory for several reasons:

1. Technology and innovation hub: South Korea’s leadership in semiconductors, 5G technology, battery production, and consumer electronics aligns with Singapore’s focus on advanced manufacturing and digital economy

2. Supply chain resilience: As both countries work to diversify away from over-reliance on China, mutual investment strengthens regional supply chain resilience

3. Financial sector opportunities: Korean assets present attractive valuations for Singaporean family offices and institutional investors, benefiting from the weaker Korean won and lower hedging premiums

4. Cultural and people-to-people ties: K-pop, Korean drama, and cultural exchanges have strengthened bilateral connections, with weekly passenger flights nearly doubling from 33 in 2010 to 64 in 2019

Impact Assessment for Singapore

Limited direct impact:

Singapore’s diversified economy and limited exposure to Korean political developments mean direct economic impact remains minimal. Singapore’s economy operates independently, and bilateral trade represents a relatively small portion of total trade volumes.

Potential indirect effects:

Investment opportunities: Market volatility in South Korea may present attractive entry points for Singaporean investors in technology, real estate, and consumer sectors
Supply chain considerations: Companies operating across both markets may need to reassess risk management strategies, though long-term fundamentals remain sound
Regional stability: As a regional financial hub, Singapore benefits from political stability across Asia. Prolonged instability in South Korea could affect broader regional confidence, though effects would likely be modest
Strategic partnership timing: The upgraded Strategic Partnership demonstrates Singapore’s confidence in South Korea’s long-term prospects despite short-term political challenges

Sectors of continued opportunity:

Singapore-based investors and companies remain positive about:

South Korean semiconductor industry amid the AI boom
Beauty and cosmetics exports (on track for record highs in 2025)
Data centers and digital infrastructure
Rental housing and commercial real estate
Healthcare and biotechnology

Luminas Financial CEO Sen Sui noted at the ASK Singapore 2025 conference that Korea presents excellent opportunities for family offices seeking to diversify through innovation-led sectors and emerging consumer markets. Samsung SRA Asset Management Global CIO Jae Yeon Kim highlighted that Korean assets remain attractive to cross-border investors due to favorable valuations.

Regional Cooperation Context

Both Singapore and South Korea participated actively in the October 2025 APEC Ministerial Meeting in Gyeongju, South Korea, where discussions centered on advancing cooperation, supporting innovation, and promoting shared prosperity through sustainable trade. Singapore secured APEC’s endorsement to establish the APEC Centre of Excellence for Paperless Trade (ACCEPT), demonstrating continued confidence in regional cooperation mechanisms.

Looking Ahead

Key Dates and Developments

January 16, 2026: Verdict expected in Yoon’s obstruction of justice trial, two days before his arrest warrant expires

January 28, 2026: Lower court ruling expected on Kim Keon Hee’s bribery and corruption charges

Early 2026: Verdict expected in Yoon’s insurrection trial, potentially around February

Beyond 2026: Additional trials for Yoon on charges including manipulation of military operations, interference in investigations, and perjury

Broader Implications

The Kim-Yoon scandal represents more than personal criminality; it highlights systemic governance challenges in South Korea’s political system. The crisis has exposed:

Vulnerabilities in preventing executive abuse of power
Challenges in maintaining transparency around presidential influence
Need for institutional reforms to prevent future abuses
Tensions between rapid economic development and democratic accountability

For Singapore and regional partners, South Korea’s political crisis serves as a reminder of the importance of:

Strong institutional checks and balances
Transparent governance systems
Diverse economic partnerships to manage political risk
Long-term strategic thinking beyond short-term volatility

Despite current challenges, South Korea’s fundamental economic strengths—including technological leadership, educated workforce, strategic location, and innovation capacity—remain intact. The nation has successfully navigated previous political crises, and institutions have demonstrated resilience in upholding democratic principles and rule of law.

The upgraded Singapore-South Korea Strategic Partnership signals confidence that bilateral cooperation will weather this storm and emerge stronger, built on shared interests in regional stability, economic prosperity, and technological innovation.

Note: This analysis is based on information available as of December 29, 2025. The situations surrounding both Kim Keon Hee and Yoon Suk Yeol remain fluid, with multiple trials ongoing and verdicts pending in early 2026.