Richard Kim, the creator of the now-defunct "crypto casino" Zero Edge, was arrested for federal securities fraud and later released on bail. Kim used $100,000 in cash as collateral for his $250,000 bond after he was arrested last Tuesday.
Before starting Zero Edge, Kim had a successful career at major financial institutions like JP Morgan and Goldman Sachs. The case is being heard in the Southern District of New York (SDNY).
The downfall of Richard Kim's Crypto Casino
Richard Kim was known as a prosperous crypto entrepreneur before his venture took a turn. Leaving his position at Galaxy Digital, where he worked as an executive, lawyer, and expert trader in March 2024, he founded Zero Edge.
The concept behind the "crypto casino" was to incorporate traditional gambling into blockchain technology, as explained in a recent court filing:
"Kim assured potential investors that Zero Edge would create multiple on-chain games, starting with craps, and run a free-to-play/social casino version where players could win virtual currency, as well as a real money version. Kim positioned himself as the company's chief architect."
Utilizing his connections from Galaxy and elsewhere, Kim managed to raise over $7 million in seed funding. Despite this, Zero Edge never materialized.
Kim revealed that he initially lost $80,000 in a phishing scam and then squandered $3.8 million through risky leveraged crypto trades within a week of receiving the initial funding.
For several months, Kim deceived investors before admitting last June that he struggled with gambling addiction. Some of the casino's investors, including Galaxy, filed complaints that led to federal charges this week.
The FBI arrested Kim for wire and securities fraud, and the trial is taking place at SDNY.
Although Kim's failed digital casino may seem minor in the realm of crypto offenses, it is crucial for the federal government to prosecute these cases. Recent actions have suggested a lack of regulatory enforcement in the crypto space, including the disbanding of the Department of Justice's Crypto Enforcement Team.
Despite the SDNY's announcement to cease crypto prosecutions, fresh cases like Kim's are still being pursued. While Kim is currently out on bail, the consequences of his failed casino project remain. The outcomes of this case will serve as a significant benchmark for US crypto regulations.