Wall Street Veteran Accused of $7 Million Cryptocurrency Gambling Scam

In a shocking turn of events, federal prosecutors have charged Richard Kim, a former executive at Wall Street firms and founder of a startup crypto casino, with wire fraud and securities fraud. The U.S. Attorney's Office in New York, led by U.S. prosecutor Jay Clayton, has accused Kim of misappropriating nearly 4 million USD of investor funds for personal crypto trading and online gambling instead of developing a blockchain-based casino app.

Zero Edge, the startup crypto casino in question, raised over $7 million, with the alleged misappropriation of funds beginning within days of closing a seed round around June 20, 2024. The wire fraud charge alleges Kim used interstate communications to misappropriate funds, while the securities fraud count accuses him of using "manipulative and deceptive devices" related to securities.

Initially, reports indicated Kim admitted losing at least $3.67 million shortly after funding closed. However, prosecutors later cited a figure closer to $4.3 million as the amount lost. The FBI alleges that Kim lost "nearly all" of the funds through high-risk trades and gambling.

Kim was arrested on Tuesday and court records indicate he was released on a $250,000 secured bond. Galaxy Digital, an investor in Zero Edge, and other parties reported Kim's conduct to the authorities. Kim admitted his actions were "grossly negligent" to the authorities.

In a surprising twist, Kim said he intended to repay investors despite resigning from Zero Edge on July 2. He attributed the losses to leveraged crypto trades during Bitcoin's June decline, a long-standing gambling addiction, and a "downward spiral."

The case is being handled in the Southern District of New York, where the charges were filed in a formal complaint. It serves as a stark reminder of the potential risks and pitfalls in the rapidly evolving world of cryptocurrency.