Crypto Founder Arrested for $7M Fraud, Feds Push Back on Crime Concerns

Richard Kim, the founder of Zero Edge, a defunct “crypto casino,” was arrested and subsequently released on bail in a federal securities fraud case. Kim, who had an esteemed career at major financial institutions like JP Morgan and Goldman Sachs, was arrested on Tuesday and posted a $250,000 bond using $100,000 in cash as collateral. The case is being heard in the Southern District of New York.

Before the collapse of Zero Edge, Kim was seen as a successful crypto entrepreneur. He was an executive at Galaxy Digital, an attorney, and an elite trader. In March 2024, he left Galaxy Digital to found Zero Edge, a platform that aimed to bring classical gambling onto the blockchain. According to court documents, Kim represented to prospective investors that Zero Edge would develop various on-chain games, starting with craps, and operate both a free-to-play social casino version and a real-money version. Kim leveraged his former connections, including those at Galaxy, to raise over $7 million in seed funding. However, the casino never opened.

Kim initially lost $80,000 to a phishing scam and blew through $3.8 million by chasing losses in high-risk leveraged crypto trades within a week of his initial funding round. He misled investors for months before finally coming clean last June, describing himself as a gambling addict. Several of the casino’s investors, including Galaxy, filed complaints that progressed to federal charges this week. The FBI arrested Kim on charges of wire fraud and securities fraud, and he is being tried in the Southern District of New York.

Kim’s aborted attempt to open a digital casino is relatively small compared to other crypto crimes. However, it is significant that the federal government is seeking to prosecute him. There have been concerns within the community that crime is becoming legalized as regulators halt enforcement actions. Even the Southern District of New York, which is handling Kim’s case, had previously claimed it would end crypto prosecutions. This case may be a small win for justice, but fresh crypto cases are being tried. Kim is currently out on bail, but he still faces repercussions for his failed casino. The outcome of this case will be an important data point for US crypto enforcement.