The Department of Justice (DOJ) has charged Richard Kim, the creator of cryptocurrency casino Zero Edge, with securities and wire fraud after he allegedly defrauded investors of about $3.8 million after a $4.3 million investment round in 2024.
An indictment against Kim was unsealed on Wednesday by Assistant Director in Charge of the FBI's New York Field Office, Christopher G. Raia, and United States Attorney for the Southern District of New York, Jay Clayton. The action was taken around three months after the entrepreneur was accused of fraud by the Securities and Exchange Commission (SEC).
"As alleged, Richard Kim misled investors by promising that he would build a blockchain-based casino gaming app, but ironically, Kim turned around and gambled away the very funds he said he would use to build a better casino,” said US Attorney Jay Clayton in a statement. “Founders who abuse the trust of their investors threaten the integrity of our important and uniquely American venture capital market.”
Kim worked as an executive at JPMorgan and Goldman Sachs before founding Zero Edge in March 2024. Given his background, investors would have felt at ease lending money to his fledgling iGaming company.
Kim Wasted Investor Money and Has a Gambling Problem
Kim, 39, admitted to having gambling problems for almost 20 years in a July 2024 Substack post. Kim allegedly transferred around $3.8 million to another online casino and other cryptocurrency exchanges shortly after Zero Edge obtained $4.3 million in initial funding last year, according to the DOJ.
According to the Justice Department, Kim's personal Coinbase account received a transfer of $3.8 million. It was then transferred to additional cryptocurrency exchanges, like as Binance, Kraken, and Backpack. Kim transferred $7 million (net $1 million) to a number of digital currency exchanges and to Shuffle.com, which bills itself as a “VIP Crypto Casino and Sportsbook,” between June 21 and June 27, 2024.
In addition, Kim acknowledged his wrongdoing, claiming that his bitter bitcoin exchanges "triggered old demons." But according to the DOJ, he wasn't as honest about the losses as he claimed to be.
“Even as KIM admitted to some investors that he had misappropriated funds, he continued to conceal the true nature of his conduct, telling investors that he had lost the money as a result of a ‘treasury management strategy’ rather than personal gambling,” according to the agency.
Zero Edge would have succeeded if it weren't for Kim's dishonesty, as bitcoin casinos have become increasingly popular in recent years. Furthermore, the operator's goal of eliminating the house edge on well-known games like roulette and blackjack may have made Zero Edge's concept appealing to gamblers.
Kim Might Be Having Trouble
Although Kim acknowledged to the FBI that his actions were "completely unjustifiable" and that he "was clearly wrong from the beginning," he could still face a lengthy prison sentence. He faces a potential penalty of 20 years in prison for each of the two counts of securities fraud and wire fraud.
"The maximum potential sentence is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge,” according to the Justice Department.
Mike Novogratz's cryptobanking company Galaxy Digital was one of the investors whose money Kim embezzled. Galaxy said that its losses from the Zero Edge issue last year were minimal.
