Richard Kim, a former general partner at Galaxy Digital (TSX: GLXY), a prominent cryptocurrency firm headed by Michael Novogratz, has found himself at the center of a financial scandal. Kim, who left Galaxy in March to start Zero Edge, a crypto casino startup, has admitted to misappropriating at least $3.67 million of company funds.
Zero Edge, pitched as a first-of-its-kind crypto casino aimed at providing transparency and equal odds to gamblers, raised over $7 million in a seed funding round. Investors, including Galaxy Digital, were optimistic about the venture’s potential. However, within days of securing the funds, Kim began placing risky leveraged bets on cryptocurrencies.
As the price of Bitcoin tumbled from nearly $70,000 in early June to about $62,000, Kim’s trades resulted in substantial losses. By June 29, he had informed Zero Edge’s board of directors that he had lost approximately $3.67 million. On July 2, following a request from the board, Kim resigned from his position.
Galaxy Digital, which had made an investment in Zero Edge, reported Kim’s conduct to the authorities. A spokesperson for Galaxy described the company’s investment in Zero Edge as “immaterial” but emphasized the firm’s commitment to addressing the misconduct.
“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 spokesperson told CoinDesk.
In his statement to CoinDesk, Kim expressed deep regret for his actions and detailed his efforts to make amends. “Part of my rationale in reaching out proactively to the SEC was to say, OK guys, I really f—d up. I lost this money. It was grossly negligent. But I didn’t intend to go run away with this money,” he said.
Kim attributed his actions to a long-standing struggle with gambling, exacerbated by the pressure to “make it back” after an initial mistake. “The downfall began with a careless mistake – a phishing site that cost $80k,” he explained. “This triggered my old demons, the need to ‘make it back’ to preserve my reputation.”
Despite the setbacks, Kim remains committed to his vision for a blockchain-based casino. “I messed up catastrophically. But I refuse to give up,” he stated. “To my investors: you didn’t just back a project; you invested in my vision, my potential. I will continue building because the world desperately needs what we started.”
Kim, for his part, is determined to rebuild and repay his investors. “It is precisely the fact that I have proven untrustworthy that compels me to create trustless systems,” he remarked.
Kim’s scandal is the latest in a series of controversies to hit the blockchain industry’s venture capital scene. Just last week, Niraj Pant, a former general partner at Polychain, had violated the fund’s policies by making a secret financial arrangement with a company he helped fund.
Information for this briefing was found via CoinDesk and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.