A Tale of Crypto Misfortune: The Downfall of Zero Edge

A Tale of Crypto Misfortune

It’s a tale as old as crypto, and maybe finance itself: One little money mistake leads to another, and suddenly a company founder is down a deep hole, with investors clamoring for their funds back.

The Founder and the Investors

In this case, one of the investors is Galaxy, the prominent crypto firm headed by former Goldman Sachs and Fortress Investment Group executive Mike Novogratz.

The company founder, Richard Kim, was previously a general partner at Galaxy Interactive, a gaming-focused venture fund under Galaxy. He also worked at the Wall Street banks JPMorgan and Goldman Sachs, following a stint at the prestigious law firm Cleary Gottlieb in the late 2000s, according to a bio.

Kim pitched Zero Edge as a first-of-its-kind crypto casino, meant to level the playing field and give gamblers transparency. The name suggests that the house in the casino has no advantage over its customers.

The Downfall

According to Kim, the losses mounted as the bitcoin (BTC) price tumbled last month. The largest cryptocurrency’s price has fallen to about $62,000 now from close to $70,000 at the start of June.

“Mr. Kim left Galaxy in March 2024 to start Zero Edge, a company in which Galaxy had an immaterial balance-sheet investment,” a spokesperson for Galaxy told CoinDesk. “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.” Galaxy’s spokesperson declined to specify the size of its investment into Zero Edge.

The Confession

Kim stepped down from his role at the company after admitting to investors that he lost most of their funds in a series of bad crypto trades.

“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,” Kim told CoinDesk.

The Repercussions

The Zero Edge incident is the latest shenanigan to hit the blockchain industry’s growing venture capital scene, which has been marred by controversy since its inception.

The Future

Kim says he remains intent on building out his vision of a blockchain-based casino and “has every intention” of paying back his investors. He disagrees with decisions made by his partners and the company’s board to, in his view, wind the company down.

“I messed up catastrophically. But I refuse to give up,” Kim added in his written statement. “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.”

In his statement, Kim cited the Jungian Swiss psychologist Marie-Louise von Franz, in turn quoting the Swiss psychiatrist Carl Jung himself as once saying, “To be in a situation where there is no way out, or to be in a conflict where there is no solution, is the classical beginning of the process of individuation.”