Founder’s Gambling ‘Struggles’ Spur Crippling Loss at Crypto Casino Backed by Galaxy

As a seasoned financial expert with a deep understanding of traditional investment markets and the emerging crypto space, I find it intriguing when a well-known player like Galaxy enters the crypto arena. Headed by Mike Novogratz, a former executive at prestigious firms such as Goldman Sachs and Fortress Investment Group, this investor brings an impressive pedigree of financial expertise to the table. With his extensive background in traditional finance, Novogratz is uniquely positioned to navigate the complexities of both industries. The addition of Galaxy to the crypto landscape underscores the growing legitimacy and maturation of the digital asset class.

As a researcher, I’ve come across some intriguing information about Richard Kim, the founder of a yet-to-be-named company. Previously, he held the position of general partner at Galaxy Interactive, a venture capital firm specializing in gaming industry investments, which is part of the larger Galaxy group. Before that, he spent time working at esteemed financial institutions JPMorgan and Goldman Sachs. Earlier in his career, Kim worked at Cleary Gottlieb, a renowned law firm.

Galaxy is among the accusers claiming that Kim misused over $3.67 million in funds from Zero Edge, her latest blockchain venture.

Kim presented Zero Edge as a pioneering crypto gambling platform, designed to create equality and ensure transparency for players. The moniker itself implies that, unlike traditional casinos, there is no edge or advantage held by the house against its patrons.

In an interview with CoinDesk, Kim revealed that Zero Edge had secured over $7 million in investment from backers, finalizing the seed funding round merely two months prior. However, following his confession to investors about significant losses incurred through unfortunate crypto transactions, he relinquished his position within the company.

Based on my extensive experience in corporate communications and dealing with similar situations, I believe that Mr. Kim’s departure from Galaxy in March 2024 to establish Zero Edge was a strategic move for him. However, it seems that during his tenure at this new company, he engaged in actions that were questionable and led to concerns from all involved parties, including Galaxy. As a communications professional, I can appreciate the delicacy of this situation, and the decision made by Galaxy and other investors to report Mr. Kim’s conduct to the authorities is both prudent and responsible. Unfortunately, the size of Galaxy’s investment into Zero Edge remains undisclosed; however, given their swift response to any potential wrongdoing, it’s likely that their stake was relatively small compared to the potential risks.

Kim said he also reported himself to the U.S. Securities and Exchange Commission’s public tip line.

In an effort to be transparent and take responsibility for my actions, I felt it necessary to contact the SEC directly. I wanted to explain that I had made a serious mistake resulting in lost funds, which was due to negligence on my part. However, my intention was never to misappropriate or hide this money from regulatory authorities.

In an email obtained by CoinDesk and sent to Zero Edge shareholders this month, the company announced that they had completed a seed financing round on June 20. However, by the following day, as mentioned in the email, Kim reportedly started making leveraged investments in cryptocurrencies, leading to substantial losses for the company over the next few days.

In my analysis of the situation, the chain of events leading to the downfall started with an unguarded moment – falling prey to a phishing site that resulted in a significant loss of $80k. This incident resurrected my past struggles, fueling an intense desire to recoup my losses and safeguard my reputation.

Based on Kim’s account, he descended into a vicious cycle of leverage trading, obtaining additional funds, and concealing the truth.

“After the completion of the seed funding round, I was prepared to move on and leave my past mistakes behind,” Kim explained. “However, as soon as I received the funds, an irresistible urge took hold of me to make amends for my previous errors. In a matter of days, I had invested heavily in leveraged long positions. Sadly, when bitcoin plummeted, I suffered significant losses, wiping out my entire investment.”

The Zero Edge incident represents the latest scandal to unfold in the burgeoning world of blockchain industry venture capital, an arena that has been shrouded in controversy since its beginning. Only a week ago, CoinDesk disclosed that Niraj Pant, a former partner at leading crypto investment firm Polychain, went against the fund’s rules by engaging in clandestine financial dealings with a company that Polychain had previously invested in.

As a successful crypto investor looking back on my industry’s history, I can’t help but feel dismayed by the downfall of once-rising star Kim. Having graduated from the University of Washington at 18 and Columbia Law School at an astonishingly young age of 21 in 2007, Kim was a beacon of hope for many aspiring professionals. Yet, recent allegations have painted a drastically different picture.

Prior to signing on with Galaxy in the year 2018, Kim amassed an impressive professional background in the conventional financial industry: Between the years 2015 and 2018, he served as the COO for Goldman Sachs’ international foreign exchange and emerging markets trading department. During this tenure, he played a significant role in expanding the digital-assets segment of the Wall Street giant in 2018. Preceding that position, Kim held the joint COO role for global foreign exchange and emerging markets trading at JP Morgan.

Kim expresses his determination to carry out his plan for creating a blockchain casino and intends to repay his investors. He holds strong objections towards the actions of his partners and the board, believing they are prematurely shutting down the company.

Zero Edge did not immediately respond to a request for comment.

“In his conversation with CoinDesk, Kim expressed that we had approximately 12 months to develop this project. However, due to reputational concerns, the company felt compelled to halt operations instead, a move I believe was not the most beneficial decision for all investors involved.”

In his statement, Kim acknowledged making a devastating mistake but expressed his determination not to quit. He reassured his investors by emphasizing that their investment wasn’t just in the project; it was in his vision and potential. Despite past untrustworthiness, he vowed to create trustless systems as a means of restoring faith.

Kim referred to Marie-Louise von Franz, a Jungian psychologist from Switzerland, who had previously quoted Carl Jung. Jung is known to have expressed that reaching a dead-end or being embroiled in an unsolvable conflict initiates the journey of individuation. However, it’s important to note that this predicament isn’t intended to be a hopeless one; rather, it serves as a catalyst. Typically, the anima doesn’t directly guide a man to paradise but instead drops him into a heated crucible for some time first.