Richard Kim was arrested this week after losing most of the $7 million he had raised to fund crypto casino venture, Zero Edge.
According to an FBI complaint filed on Tuesday, 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.”
Kim admitted to losing investors’ money last year. He reported the losses to the US Securities and Exchange Commission (SEC).
Crypto casinos offer investors and players the allure of big prizes and bonuses. Due to operating in a legal gray area, they can offer more promotions, faster payments, cash-outs, and increased anonymity.
Kim, “I really f–d up”
Kim commented on why he turned himself in, “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,”
Explaining how the losses escalated, he added, “The downfall began with a careless mistake — a phishing site that cost $80k.”
From there, the gambles spiralled out of control. He added, “This triggered my old demons, the need to ‘make it back’ to preserve my reputation.”
Crypto casino back to square zero
Kim pitched Zero Edge as a first-of-its-kind crypto casino that would offer gamblers transparency. He left his role as an executive at Galaxy in March 2024 to set up the company. However, the loss of investor funds meant that the site never got going.
He had spoken of previous gambling addiction as a motivating factor to start his own gambling enterprise that reduced the house edge.
Kim informed investors of massive losses in an email in June last year. The losses had become untenable following a crash in the price of Bitcoin.
Upon hearing the news, Galaxy, a prominent investor in the project reported that they informed authorities and asked Kim to resign.
A spokesperson for Galaxy said, “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.
He added, “Since learning of these events, the company and the board have asked Mr. Kim to resign,” and he “submitted such resignation on July 2.”
This differs slightly from Kim’s account that he turned himself in to the authorities, although he did admit to his losses to investors.
Crypto casinos rise to prominence
Investors were tempted to give Kim their money for Zero Edge due to the rapid rise of crypto casinos. The market boomed to over $10 billion in 2024 and is expected to move past $15 billion by next year.
Stake, the biggest company operating in the crypto gambling field, generated $4.7 billion last year. Their partnership with celebrities such as Drake and UFC fighters has given them a platform to attract players all over the world.
Other platforms such as BC.Game, Rollbit, and Roobet have seen triple-digit growth year-on-year. The case of Richard Kim shows the opportunity for new projects to attract investors.
According to court records, Kim posted a secured bond of $250,000 and put up $100,000 in “cash or real property” to secure it.
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