In February 2005, Horie upped the ante again, making a play for Nippon Broadcasting Systems, the radio unit of the venerable Fuji TV conglomerate. The move inspired widespread criticism, not just because of the hubris of his goal, but because of the means he used to achieve it. Exploiting a loophole in Japanese securities law, he acquired a 35% stake in after-hours trading before his target even realized it was under attack. Critics howled, calling him "sneaky" and "un-Japanese," and regulators closed the loophole. While the bid ultimately failed, Horie remained undaunted and soon moved to his biggest act yet: running for parliament. Handpicked by Prime Minister Junichiro Koizumi, Horie signed on to become an "assassin," one of the loyalists deployed in September's snap elections to unseat opponents of the administration's reform agenda. Horie's target: 68-year-old Shizuka Kamei, whose constituency had returned him to office nine times. Visibly insulted to be running against the political neophyte, Kamei dismissed Horie as a curiosity and a city slicker before beating him handily. But for Livedoor, the p.r. value of his candidacy was incalculable.

Given the divisive cultural icon he had become, perhaps the real surprise is that Horie's company had not encountered more official scrutiny earlier. But once his luck turned, his vulnerabilities became brutally apparent. Following the raid, his shareholders proved to be fair-weather fans. Since last Monday, Livedoor's stock has dropped 52%, shedding more than $3 billion in market value. At one point, sell orders outnumbered buys by 1,500 to 1. The Livedoor selloff soon turned into a marketwide panic that sent the Nikkei 225 tumbling 2.8% on Tuesday and another 2.9% on Wednesday. On Thursday, Livedoor announced that its internal investigation had concluded that it had done nothing wrong, though it released few details to back up this claim. Horie, meanwhile, has given numerous press conferences in which he looks tired and stressed but maintains that he's both cooperating with the investigation and believes he'll be vindicated.

Livedoor's public announcements haven't stemmed the tide of allegations in the Japanese press. The Yomiuri Shimbun, for example, claimed that prosecutors have expanded their investigation to include alleged accounting fraud, examining whether Livedoor falsified its 2004 financial reports to show a profit of $12 million when it had actually suffered a loss. Adding to the intrigue, a brokerage-house executive and former Livedoor employee under investigation over his involvement with the company's investments was found dead in an Okinawa hotel room last week in an apparent suicide. And a Livedoor director resigned on Thursday with no public explanation.

Despite all the market and media turmoil, most institutional investors and analysts point out that Livedoor isn't a large company, and emphasize that the wider economic impact of its troubles should prove limited. Peter Morgan, chief economist for HSBC Securities in Tokyo, says the Livedoor case is a symbolic battle, not a significant economic setback: "The economy is better now than it's been for quite some time. The fundamentals still look pretty good." As for the volume of orders that prompted the stock exchange's early closing, Takuji Aida, chief economist at Barclays Capital Japan, blames undisciplined individual investors. "Many Japanese households have started to join in the stock market," he says, "and a lot of money went into technology-stock shares. They got panicked. This should be a lesson for them." Indeed, on Thursday, Japan's market staged its biggest rally in 20 months, and exchange chairman Taizo Nishimuro assured investors that it would double its trading capacity by the end of the year.

Though the market has rebounded, suspicions linger that the allegations against Livedoor might still turn out to be symptomatic of a broader problem with corporate conduct in Japan. HSBC's Morgan says there is no sign of that so far, "but if Livedoor had that brilliant idea, it's possible that other companies might have had similar thoughts." For now, however, most analysts contacted by Time contend that Japan's stock market, economy and oversight of financial reporting remain basically sound. Peter Tasker, an economist at Dresdner Kleinwort Wasserstein in Tokyo, says the "Livedoor Shock" may even have been beneficial, triggering an overdue correction after speculative excess drove the Japanese market to a 40% rise in barely six months.

Meanwhile, the establishment has hardly been able to contain its glee at Horie's comeuppance. Every major newspaper has run editorials more or less condemning him as an alchemist, a huckster and a criminal. Hiroshi Okuda, former president of Toyota, said in a speech: "The business model that says you can do anything if you have money should not be respected." Okuda later said he regretted letting Livedoor join Keidanren, Japan's most prestigious business association, which he chairs. "I messed up," said Okuda. "I acted too hastily."

But true to form for a man who once wrote a book called I Will Not Die, Horie is not yet conceding defeat. Asked at a press conference if he will resign, he derided the question as "irresponsible." Just under a year ago, at a seminar in Sapporo for budding entrepreneurs, Horie claimed: "Even if you fail, the worst that you can end up with is zero. You can always reset." Now Japan is waiting to see if that was nothing more than bluster.

—With reporting by Ilya Garger and Toko Sekiguchi/Tokyo

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