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The U.S. Securities and Exchange Commission announced an emergency action on Monday against Miami-based investment adviser BKCoin Management LLC and one of its principals, Kevin Kang, alleging a crypto-asset fraud scheme.
The SEC said it successfully obtained an asset freeze, appointment of a receiver, and other emergency 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 around $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 news release. A Ponzi scheme is a type of fraud that pays profits to earlier investors with funds raised from newer investors.
“As we allege, investors entrusted their money to the defendants to trade in crypto assets. Instead, the defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct,” said Eric I. Bustillo, director of the SEC’s Miami regional office, in a statement.
The SEC said the complaint, filed in U.S. District Court for the Southern District of Florida, seeks permanent injunctions against both of the defendants; disgorgement, prejudgment interest, and a civil penalty from both of the defendants; and, an officer and director bar and conduct-based injunction against Kang.
BKCoin and Kang’s lawyers didn’t 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 used more than $3.6 million to make Ponzi-like payments to fund investors, according to the SEC.
The complain also alleges that Kang used at least $371,000 of investor money to pay for personal expenses like vacations, sporting events, and a New York City apartment. He attempted to hide the unauthorized use of the money by altering documents with “inflated bank account balances to the third-party administrator,” according to the SEC.
The firm also told investors that BKCoin or one of the funds had received an audit opinion when it hadn’t, according to the SEC filing. An audit opinion is an independent auditor’s report that accompanies financial statements.
“This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena,” said Bustillo, 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 for promoting crypto tokens without disclosing he was being paid for the promotion, and charged Terraform Labs and CEO Do Kwon with 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.
