Tech company CEO faces federal charges of securities and wire fraud after allegedly gambling away millions from the company’s seed round funding

New York – Federal prosecutors have charged the former head of a New York-based tech startup with securities and wire fraud, alleging he diverted millions of dollars in investor funds to gamble and trade cryptocurrency for his own benefit.

Richard Kim, 39, the onetime chief executive officer of Zero Edge Corporation, was arrested after investigators uncovered what they describe as a scheme built on false promises and misleading assurances. The indictment, unsealed in Manhattan federal court, accuses Kim of raising millions under the guise of building a blockchain-powered casino gaming app—only to spend much of it at an online crypto casino and in speculative crypto trades.

“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,” said U.S. Attorney Jay Clayton. “Founders who abuse the trust of their investors threaten the integrity of our important and uniquely American venture capital market.”

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The case is being heard by U.S. District Judge Lorna G. Schofield and prosecuted by the Securities and Commodities Fraud Task Force of the Southern District of New York. Prosecutors allege the misconduct began almost immediately after Kim’s company secured a $4.3 million seed funding round in March 2024.

Zero Edge was pitched as an innovative gaming platform that would use blockchain technology to launch a suite of online games, beginning with craps before expanding to roulette, baccarat, and blackjack. Kim assured investors their money would be spent on product development, technology infrastructure, and building the company. Instead, authorities say, the money was funneled into Kim’s personal cryptocurrency accounts.

According to the indictment, roughly $3.8 million of the seed funding was transferred from company accounts into a personal account Kim held at Coinbase. From there, about $1 million was moved to other crypto exchanges, including Binance, Kraken, and Backpack. Within a matter of days in June 2024, Kim allegedly moved approximately $7 million—resulting in net transfers of about $1 million—from Coinbase and Kraken into an account at Shuffle.com, which promotes itself as a “VIP Crypto Casino and Sportsbook.”

In addition to these gambling-related transfers, prosecutors allege Kim directed about $450,000 to unidentified cryptocurrency wallets and moved another $145,000 from Kraken into a personal checking account.

FBI Assistant Director in Charge Christopher G. Raia said the conduct reflects a deliberate choice to misuse investor trust. “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,” Raia said. “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.”

Court filings show that Kim eventually admitted to investors that he had lost millions, writing in an email that he was “solely responsible for the loss of $3.67m of the Company’s balance sheet” due to “leveraged trading losses from seed round financing proceeds.” He told them the company had “lost nearly all its money.” Yet prosecutors say he downplayed the truth, framing the losses as part of a “treasury management strategy” rather than disclosing that he had been gambling.

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When taken into custody, Kim reportedly told FBI agents that he knew from the outset that what he was doing “was clearly wrong from the beginning” and “completely unjustifiable.”

Kim now faces one count each of securities fraud and wire fraud. Both charges carry a potential maximum sentence of 20 years in prison. The actual sentence, if convicted, would be determined by the judge and could be influenced by federal sentencing guidelines and other factors.

The investigation was conducted by FBI Special Agents, with assistance from the U.S. Securities and Exchange Commission, which has filed a parallel civil enforcement action against Kim. Prosecutors have stressed that the charges remain allegations, and Kim is presumed innocent unless proven guilty.

U.S. Attorney Clayton credited the work of investigators in bringing the case forward and underscored the broader implications for the startup funding landscape. “Founders who abuse the trust of their investors undermine the market for innovation and harm not only their own companies but the entire venture ecosystem,” Clayton said.

The indictment paints a picture of a rapid and reckless misuse of startup capital—one that bypassed the technology development Kim promised and instead funded a high-stakes spree across cryptocurrency exchanges and online casinos. For investors who had been sold on a vision of a cutting-edge gaming platform, the revelations are a stark reminder of the risks inherent in early-stage funding, where transparency and oversight can be limited.

The case is expected to move forward in federal court in Manhattan, where prosecutors will seek to prove that Kim’s actions were intentional, deceptive, and designed to benefit himself at the expense of those who entrusted him with their money. If convicted, Kim would face not only the prospect of significant prison time but also potential restitution orders aimed at compensating the investors who lost millions in the alleged scheme.

For now, the collapse of Zero Edge stands as a cautionary tale—one in which a startup promising to revolutionize online gaming through blockchain instead became a vehicle for personal gambling, leaving behind empty accounts, shattered investor trust, and a CEO facing the full weight of federal charges.