SEC freezes assets of investment adviser BKCoin, claims $100 million crypto fraud scheme
The US Securities and Exchange Commission on Monday announced an emergency action against Miami-based investment adviser BKCoin Management LLC and one of its principals, Kevin Kang, alleging crypto-asset fraud.
The SEC said it successfully obtained an asset freeze, the appointment of a receiver and other relief. The SEC said the emergency action was filed under seal on Feb. 23 and unsealed Monday.
Between October 2018 and September 2022, BKCoin raised about $100 million from at least 55 investors to invest in crypto, but the firm and Kang allegedly used the money for personal use and Ponzi-like payments, the SEC said in a press release. A Ponzi scheme is a type of scam that pays profits to previous investors with funds obtained from newer investors.
“As we allege, investors entrusted their money to the defendants to trade in cryptoassets. Instead, the defendants embezzled their money, created false documents and even engaged in Ponzi-like behavior,” said Eric I. Bustillo, director of The SEC’s regional office in Miami, in a statement.
The SEC said the complaint, filed in the US District Court for the Southern District of Florida, seeks permanent injunctions against both defendants; disgorgement, prejudgment interest and a civil penalty from both defendants; and, an officer and director bar and conduct-based injunction against Kang.
Disgorgement is a remedy that requires a party who has profited from illegal acts to relinquish profits they have made, and prejudgment interest is the interest that a creditor is entitled to collect.
BKCoin and Kang’s lawyers did not immediately respond to requests for comment.
BKCoin and Kang had told investors that their money would be used to trade crypto and that BKCoin would generate returns through managed accounts and five private funds, the SEC statement said. But Kang and BKCoin allegedly spent more than $3.6 million to make Ponzi-like payments to fund investors, according to the SEC.
The complaint also alleges that Kang used at least $371,000 of investor money to pay for personal expenses such as vacations, sporting events and an apartment in New York City. He attempted to conceal the unauthorized use of the money by altering documents with “inflated bank account balances of the third-party administrator,” according to the SEC.
The firm also told investors that BKCoin or one of its funds had received an audit opinion when it had not, according to the SEC filing. An audit statement is an independent audit report that accompanies the accounts.
“This action highlights our continued commitment to protecting investors and removing fraud in all securities sectors, including the cryptoasset arena,” Bustillo said in a statement.
This is just the latest crypto crackdown by the SEC. Last month, the firm charged former NBA player Paul Pierce $1.4 million to promote crypto tokens without disclosing that he was paid for the campaign, accusing Terraform Labs and CEO Do Kwon of defrauding crypto investors. The SEC has cracked down on crypto exchanges, including Kraken, a popular crypto exchange, which was hit with a $30 million fine for failing to register its crypto staking program earlier this month.
– Frances Yue contributed reporting to this article.
