A former tech company chief executive is facing allegations that he used his company’s venture capital to engage in leveraged crypto trading and online gambling.
The founder and former CEO of Zero Edge Corp., Richard Kim, has been charged with securities fraud and wire fraud for allegedly misappropriating the company’s seed capital to make speculative crypto trades, and to gamble in an online casino.
According to the indictment that was unsealed in a New York court, Kim founded Zero Edge in March of last year, purportedly to build an app-based casino offering blockchain-based games such as craps, roulette and blackjack. The company raised US$4.3 million in seed financing from investors to fund the app’s development, but it’s alleged that Kim diverted US$3.8 million of that funding into a personal crypto account, and later sent money to various crypto exchanges and online gambling sites.
Authorities allege that Kim admitted to investors that the company had lost most of its seed capital, but claimed that the losses were attributable to a failed “treasury management strategy” rather than personal gambling.
“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 Jay Clayton, U.S. attorney for the Southern District of New York, in a statement.
“Founders who abuse the trust of their investors threaten the integrity of our important and uniquely American venture capital market,” he added.
The U.S. Securities and Exchange Commission also previously filed a parallel civil action in the case.
The allegations have not been proven, and he is presumed to be innocent of the criminal charges.