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.
In keeping with an FBI criticism filed on Tuesday within the Southern District of New York, Kim “fraudulently induced traders to put money into Zero Edge, a cryptocurrency know-how firm he based, after which misappropriated tens of millions of {dollars} in these traders’ funds.”
The FBI stated Kim misplaced “almost all” of the $7 million he raised from traders and charged him with securities fraud and wire fraud. In keeping with court docket information, Kim posted a secured bond of $250,000 and put up $100,000 in “money or actual 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 via a collection of high-risk leveraged crypto trades.
“The downfall started with a careless mistake — a phishing website that value $80k,” Kim stated in his personal recollection of what went flawed, which he shared with CoinDesk in a written assertion that he later revealed as a public apology. “This triggered my previous demons, the necessity to ‘make it again’ to protect my repute.”
In keeping with Kim, he “began down a destructive spiral of leverage buying and selling, elevating extra capital, and hiding the reality.”
After dropping many of the $7 million he had raised for Zero Edge, Kim advised CoinDesk he reported himself to the U.S. Securities and Change Fee’s public tip line.
“A part of my rationale in reaching out proactively to the SEC was to say, OK guys, I actually f—d up. I misplaced this cash. It was grossly negligent. However I did not intend to go run away with this cash,” he advised CoinDesk in an interview.
In keeping with the FBI criticism, Kim’s earlier accounts “misleadingly described the place traders’ funds had gone, and why, and omitted to tell traders that sure funds had been transferred to Shuffle.com, the playing web site.”
Kim’s declare that he initially misplaced $80,000 to a phishing rip-off and by no means “combine[ed] private and enterprise funds,” in accordance with the FBI, did not 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 placing 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. Earlier than that, he was an lawyer with the distinguished legislation 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 begin Zero Edge, an organization through which Galaxy had an immaterial balance-sheet funding,” stated Michael Wursthorn, Galaxy’s head of communications. “Upon studying of sure actions taken by Mr. Kim in his function at Zero Edge, we, together with different traders, 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 via improved transparency.
Zero Edge by no means launched, however Kim advised 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 ceaselessly had an opaque and unfair edge over gamers.
Learn extra: Crypto On line casino Founder Apologizes for Playing Away Investor Funds