An indictment charging Richard Kim, the former Chief Executive Officer of Zero Edge Corporation, with engaging in a scheme to defraud investors and prospective investors of Zero Edge by making false and misleading statements regarding the use of investor funds and subsequently misappropriating those funds has been unsealed.
The case has been assigned to U.S. District Judge Lorna G. Schofield.
According to the allegations contained in the indictment, Kim founded Zero Edge in March 2024, purporting to build an app-based casino using blockchain and cryptocurrency technologies. Kim represented to prospective investors that Zero Edge would develop on-chain games beginning with craps, and later offering roulette, baccarat, and blackjack.
Kim also represented to investors that their funds would be used to build the business and its technology. Instead, KIM misappropriated the proceeds of the company’s seed round to make speculative cryptocurrency trades and gamble at an online casino.
Shortly after closing on the approximately $4.3 million seed financing round, Kim diverted approximately $3.8 million of investors’ funds first into a personal cryptocurrency account held at Coinbase and then sent approximately $1 million on to a variety of other crypto exchanges, including Binance, Kraken, and Backpack.
Between in or about June 21, 2024, and June 27, 2024, Kim made transfers of approximately $7 million, and net transfers of approximately $1 million, from Coinbase and Kraken to a personal account held at Shuffle.com, which advertises itself as a “VIP Crypto Casino and Sportsbook.”
Kim also directed a net sum of approximately $450,000 to other cryptocurrency wallets with unknown owners and transferred approximately $145,000 more from Kraken to a personal checking account.
In e-mails Kim later sent to investors, Kim admitted to misappropriating the investors’ funds, writing that he was “solely responsible for the loss of $3.67 million of the company’s balance sheet” following “leveraged trading losses from seed round financing proceeds” and that the company had lost nearly all its money.
But even as Kim admitted to some investors that he had misappropriated funds, he continued to conceal the true nature of his conduct, telling investors that he had lost the money as a result of a “treasury management strategy” rather than personal gambling.
At the time of his arrest, Kim admitted to the FBI that he knew what he did “was clearly wrong from the beginning” and “completely unjustifiable.”
“Richard Kim allegedly misappropriated millions of investors’ dollars intended to develop his online casino company by redirecting these funds for personal gambling and trading ventures,” said FBI Assistant Director in Charge Christopher G. Raia. “Kim allegedly hedged his bets that false assurances would induce more investments and conceal the true nature of his spending. The FBI remains committed to apprehending any individual who leverages executive positions to defraud others for selfish purposes.”
Kim, 39, of New York, New York, is charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.
The maximum potential sentence is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
