U.S. prosecutors say a former Goldman Sachs and J.P. Morgan executive gambled nearly $4 million of investor funds directed for a start-up online casino app.
Key Takeaways
- Richard Kim allegedly used $3.8 million in raised funds to gamble and make cryptocurrency trades.
- Kim admitted wrongdoing in his "unjustifiable" actions.
- He faces a maximum sentence of 20 years in prison for each of two charges.
Richard Kim, who previously served as a chief operating officer of global foreign exchange and emerging markets trading for the two financial firms and more recently as a fund investor for Galaxy Digital, was indicted on securities and wire fraud charges in June after he allegedly misappropriated $3.8 million to make “speculative cryptocurrency trades and gamble.”
Kim used the investments he raised for his company Zero Edge to play at the offshore online casino Shuffle, according to the federal indictment.
“As alleged, Richard Kim misled investors by promising that he would build a blockchain-based casino gaming app, but ironically, Kim turned around and gambled away the very funds he said he would use to build a better casino,” U.S. Attorney Jay Clayton said in a statement Wednesday. “Founders who abuse the trust of their investors threaten the integrity of our important and uniquely American venture capital market.”
'Completely unjustifiable'
Kim told the FBI upon his arrest in April that he “was clearly in the wrong,” and his actions were “completely unjustifiable,” according to the indictment, which was unsealed Tuesday.
Kim also told the Securities and Exchange Commission in July 2024 that he was “grossly negligent” and lost the seeding funds because of a “gambling addiction.”
He was released on a $250,000 bond. Kim’s indictment has not been brought before a grand jury. Judges extended deadlines to do so or drop the charges as prosecutors said they were working with Kim’s attorney to resolve the case, which hadn't happened as of Wednesday, the final day of the latest extension, CNBC's Dan Mangan reports.
The 39-year-old New York resident is charged with one count each of securities and wire fraud and faces a maximum sentence of 20 years in prison per charge.
Moving money
Federal prosecutors allege in the indictment that Kim closed on a $4.3-million seed round in June 2024 and claim he diverted $3.8 million into personal cryptocurrency accounts with Coinbase and Kraken. He transferred approximately $7 million into his account at Shuffle, a “VIP” crypto casino and sportsbook located in Curacao, from June 21 through June 27, 2024.
Kim “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,” the indictment reads.
Federal prosecutors said Kim originally told investors that their funds would be used for blockchain and cryptocurrency technologies to “develop on-chain games beginning with craps, and later offering roulette, baccarat, and blackjack,” as well as build the business.
Keeping investors in dark
Kim told investors in an email that he was “solely responsible for the loss of $3.67 (million) of the Company’s balance sheet” after “leveraged trading losses from seed round financing proceeds” left Zero Edge with no money.
Zero Edge never launched an online casino, and the company went into voluntary liquidation in December 2024.
"Kim allegedly hedged his bets that false assurances would induce more investments and conceal the true nature of his spending," said FBI assistant director in charge Christopher G. Raia. "The FBI remains committed to apprehending any individual who leverages executive positions to defraud others for selfish purposes."
