Crypto Casino Founder Richard Kim Arrested After Gambling Away Investor Funds

Richard Kim, the founding father of crypto on line casino Zero Edge, was arrested on Tuesday following allegations that he had gambled away traders’ funds.

According to an FBI criticism filed on Tuesday within the Southern District of New York, Kim “fraudulently induced investors to invest in Zero Edge, a cryptocurrency technology company he founded, and then misappropriated millions of dollars in those investors’ funds.”

The FBI mentioned Kim misplaced “nearly all” of the $7 million he raised from traders and charged him with securities fraud and wire fraud. According to court docket information, Kim posted a secured bond of $250,000 and put up $100,000 in “cash or real property” to safe it.

CoinDesk was first to report on the Zero Edge incident in July of final 12 months. In an interview on the time, Kim revealed to CoinDesk that he had gambled away greater than $3.67 million of his traders’ funds by means of a collection of high-risk leveraged crypto trades.

“The downfall began with a careless mistake — a phishing site that cost $80k,” Kim mentioned in his personal recollection of what went fallacious, which he shared with CoinDesk in a written assertion that he later printed as a public apology. “This triggered my old demons, the need to ‘make it back’ to preserve my reputation.”

According to Kim, he “started down a negative spiral of leverage trading, raising more capital, and hiding the truth.”

After shedding many of the $7 million he had raised for Zero Edge, Kim informed CoinDesk he reported himself to the U.S. Securities and Exchange Commission’s public tip line.

“Part of my rationale in reaching out proactively to the SEC was to say, OK guys, I really f—d up. I lost this money. It was grossly negligent. But I didn’t intend to go run away with this money,” he informed CoinDesk in an interview.

According to the FBI criticism, Kim’s earlier accounts “misleadingly described where investors’ funds had gone, and why, and omitted to inform investors that certain funds had been transferred to Shuffle.com, the gambling website.”

Kim’s declare that he initially misplaced $80,000 to a phishing rip-off and by no means “mix[ed] personal and business funds,” in line with the FBI, didn’t account for the truth that he had additionally despatched firm funds to a web based sportsbook and private crypto funding accounts.

Kim didn’t instantly reply to a request for remark this week.

Kim’s arrest marks a putting fall from grace. A former government of Galaxy, the crypto funding agency headed by Michael Novogratz, Kim additionally led elite buying and selling desks at JPMorgan and Goldman Sachs. Before that, he was an lawyer with the distinguished regulation agency Cleary Gottlieb.

Galaxy was among the many traders in Zero Edge who misplaced cash because of Kim’s actions.

“Mr. Kim left Galaxy in March 2024 to start Zero Edge, a company in which Galaxy had an immaterial balance-sheet investment,” mentioned Michael Wursthorn, Galaxy’s head of communications. “Upon learning of certain actions taken by Mr. Kim in his role at Zero Edge, we, along with other investors, reported his conduct to the authorities.”

Kim pitched Zero Edge as a first-of-its-kind crypto on line casino that might degree the enjoying subject for gamblers by means of improved transparency.

Zero Edge by no means launched, however Kim informed CoinDesk final 12 months that he was motivated to construct it due to his historical past with playing habit and his frustration that the home regularly had an opaque and unfair edge over gamers.

Read extra: Crypto Casino Founder Apologizes for Gambling Away Investor Funds