Federal prosecutors in New York are pursuing fraud charges against the former CEO of a crypto-powered casino, claiming the 39-year-old gambled away investors’ cash.

The U.S. Justice Department recently charged former Zero Edge CEO Richard Kim with securities and wire fraud for allegedly diverting $3.8 million worth of seed round funding to himself for personal use, according to an indictment unsealed on Wednesday.

Zero Edge closed its $4.3 million seed funding round last June, and during a seven-day stretch that month, Kim allegedly misappropriated most of investors’ funds, with $1 million diverted to a personal account at Shuffle, a crypto-powered casino and sports betting platform.

Kim allegedly told one investor that the company had only $710,000 left—just one week after Zero Edge’s seed round closed—attributing the losses to “day trading.” Other investors were allegedly told the losses were from Zero Edge’s “treasury management strategy.”

Kim, a former executive at JPMorgan and Goldman Sachs, told CoinDesk last year that “old demons” took over after he lost $80,000 to a phishing attack that started “a negative spiral of leverage trading, raising more capital, and hiding the truth.”

Following his arrest, Kim allegedly told the FBI that he was “clearly wrong from the beginning,” and that his conduct amounted to a “completely unjustifiable” betrayal to his investors.

“Kim allegedly hedged his bets that false assurances would induce more investments and conceal the true nature of his spending,” FBI Assistant Director Christopher Raia said in a statement.

Kim worked at institutional crypto firm Galaxy Digital as a venture fund investor before he left to start Zero Edge, and Galaxy had invested in his firm, court documents show.

“Richard Kim left Galaxy in March 2024 to start Zero Edge, a company in which Galaxy had an immaterial balance-sheet investment,” a Galaxy spokesperson told Decrypt. “Upon learning of certain actions taken by Mr. Kim in his role at Zero Edge, we, along with other investors, reported his conduct to the authorities.”

The U.S. Securities and Exchange Commission charged Kim with fraud in May, saying in a press release that he misappropriated investor funds “minutes” after receiving funds. The regulator noted that Zero Edge never launched, and the company is liquidating.

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