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Crypto Casino Founder Arrested After Losing $3.8M In Investor Funds

Coin WorldThursday, Apr 17, 2025 12:23 pm ET

2min read

Richard Kim, the founder of the cryptocurrency casino Zero Edge, was arrested on Tuesday following allegations that he had gambled away millions of dollars in investor funds. According to an FBI complaint filed in the Southern District of New York, Kim is accused of fraudulently inducing investors to invest in Zero Edge and then misappropriating their funds. The FBI alleges that Kim lost $3.8 million of his investors' funds and has charged him with securities fraud and wire fraud. Kim posted a secured bond of $250,000 and put up $100,000 in cash or real property to secure it.

In July of last year, Kim revealed to CoinDesk that he had gambled away more than $3.67 million of his investors' funds through a series of high-risk leveraged crypto trades. Kim's downfall began with a careless mistake—a phishing site that cost $80,000. This incident triggered his old demons, the need to "make it back" to preserve his reputation. Kim admitted to starting down a negative spiral of leverage trading, raising more capital, and hiding the truth. After losing most of the $7 million he had raised for Zero Edge, Kim reported himself to the U.S. Securities and Exchange Commission's public tip line, stating that he had lost the money due to gross negligence but did not intend to run away with it.

The FBI complaint alleges that Kim's previous accounts misleadingly described where investors' funds had gone and omitted to inform investors that certain funds had been transferred to Shuffle.com, a gambling website. Kim's claim that he initially lost $80,000 to a phishing scam overlooked the fact that he had already sent company funds to an online sportsbook and personal crypto investment accounts. Kim did not immediately respond to a request for comment this week.

Kim's arrest marks a significant fall from grace. A former executive of Galaxy, the crypto investment firm headed by Michael Novogratz, Kim also led elite trading desks at JPMorgan and Goldman Sachs. Before that, he was an attorney with the prestigious law firm Cleary Gottlieb. Galaxy was among the investors in Zero Edge who lost money as a result of Kim's activities. Michael Wursthorn, Galaxy's head of communications, stated that Kim left Galaxy in March 2024 to start Zero Edge, a company in which Galaxy had an immaterial balance-sheet investment. Upon learning of certain actions taken by Kim in his role at Zero Edge, Galaxy, along with other investors, reported his conduct to the authorities.

Kim pitched Zero Edge as a first-of-its-kind crypto casino that would level the playing field for gamblers through improved transparency. Zero Edge never launched, but Kim was motivated to build it because of his history with gambling addiction and his frustration that the house frequently had an opaque and unfair edge over players. This incident highlights the risks associated with investing in cryptocurrency ventures and the importance of due diligence and transparency in the industry.

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