It was expected that the Kings would buy out the remaining five years of the underperforming center's 12-year contract -- the team placed him on unconditional waivers on Sunday -- but they resorted to terminating him for being in violation of his contract.
The Kings did not say why Richards is in violation of the deal, although several sources told ESPN.com it involves an off-the-ice incident.
"The Los Angeles Kings today have exercised the team's right to terminate the contract of Mike Richards for a material breach of the requirements of his Standard Player's Contract," the Kings said in a statement.
According to a source, the Kings did inform the league about their intent to terminate Richards' contract, even before putting him on unconditional waivers Sunday. The NHL Players' Association has a right to file a grievance for Richards and is in the process of gathering information before deciding whether to take that route.
"We are in the process of reviewing the facts and circumstances of this matter, and will discuss the situation with the player in order to determine the appropriate course of action," NHLPA spokesman Jonathan Weatherdon said in a statement.
Several sources told ESPN.com the Kings were made aware of the situation Friday, approximately an hour after the first round of the 2015 NHL draft had begun.
The team was already in the process of trying to trade him -- discussions were in place with both the Edmonton Oilers and the Calgary Flames -- but Kings general manager Dean Lombardi immediately informed both teams upon learning about the situation that he had no prior knowledge of the incident and halted those talks, according to a source.
"He came right over to me," Oilers general manager Peter Chiarelli confirmed to ESPN.com. "He pulled me aside and said, 'Hey, Pete, this is going to come out. I had no idea. This is important you know so that talks [don't go any] further.'"
Lombardi did the same with Flames GM Brad Treliving on the draft floor, Treliving confirmed.
It is not immediately clear when said incident took place.
Richards was earning $5.75 million per season as part of a $69 million deal that was scheduled to run out in 2020.
Richards, 30, had cleared unconditional waivers on Sunday. The deadline for the first buyout window is June 30.
The move to terminate the contract means Richards' $5.75 million cap hit will not count against the team's salary cap, and the veteran immediately becomes an unrestricted free agent.
Although the team is no longer on the hook for his cap charge, the cap-recapture penalties are effective immediately.
The Kings could have used a compliance buyout on him last summer -- the last window in the new CBA for teams to do so without a cap penalty -- but Lombardi, out of loyalty to Richards and believing that the veteran center would bounce back and raise his level of play, decided not to.
Lombardi told ESPN.com in an interview earlier this month that he regretted not exercising the compliance buyout on the Kenora, Ontario, native.
"It could be the worst decision I've ever made," he said. "But for all the right reasons."
ESPN.com's Pierre LeBrun and Craig Custance contributed to this report.