On March 6, 2023, the Securities and Exchange Commission (SEC) announced that it had taken emergency action against Miami-based investment adviser BKCoin Management LLC and one of its principals, Kevin Kang, regarding a crypto asset fraud scheme. The SEC’s complaint, filed in the United States District Court for the Southern District of Florida, alleges that BKCoin and Kang violated the antifraud provisions of the federal securities laws.
From at least October 2018 through September 2022, BKCoin raised approximately $100 million from at least 55 investors to invest in crypto assets. However, instead of investing as promised, BKCoin and Kang used some of the money to make Ponzi-like payments and for personal use, misappropriating millions of dollars in the process. Kang also attempted to conceal the unauthorized use of investor money by providing altered documents with inflated bank account balances to the third-party administrator for certain of the funds.
Details of the Allegation by SEC
The complaint alleges that Kang misappropriated at least $371,000 of investor money to pay for personal expenses, including vacations, sporting events tickets, and a New York City apartment. According to the SEC, BKCoin and Kang disregarded the structure of the funds, commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors. The complaint also alleges that BKCoin materially misrepresented to some investors that BKCoin, or one of the funds, received an audit opinion from a “top four auditor,” when in fact neither BKCoin nor any of the funds received an audit opinion at any time.
The SEC’s emergency action included obtaining an asset freeze, appointment of a receiver, and other emergency relief against BKCoin and Kang, as well as emergency relief against the relief defendants, including appointment of a receiver. The SEC 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. The complaint names as relief defendants each of the funds and Bison Digital LLC, an entity that allegedly received approximately $12 million from BKCoin and the funds.
The SEC’s investigation into BKCoin and Kang’s alleged crypto asset fraud scheme is ongoing and being conducted by the Miami Regional Office. The SEC’s Office of Investor Education and Advocacy and Enforcement’s Retail Strategy Task Force has issued an Investor Alert on Digital Asset and Crypto Investment and an Investor Alert on Pyramid Schemes Posing as Multi-Level Marketing Programs. Investors can find additional information about crypto asset investment schemes, including the warning signs of fraud, at Investor.gov.
You may be also interested to read more about
- SEC Cracks Down on Binance.US
- Binance Braces for Potential Fines from US Regulators
- Silvergate – Cryptocurrency-focused Bank is in a Pickle
- Why is Dubai an Attractive Crypto Oasis?
- Hong Kong plans to make crypto purchase and trading legal for all of its citizens
- Crypto Industry is Under Siege by Regulators
- Empowering Crypto Investors: Binance Joins Forces with Law Enforcement in Powerful Anti-Scam Campaign
