The Securities and Exchange Commission (SEC) recently took emergency action against BKCoin Management LLC, an investment adviser based in Miami, and one of its principals, Kevin Kang, for allegedly running a fraudulent crypto asset scheme. The SEC successfully obtained an asset freeze, appointment of a receiver, and other emergency relief against BKCoin and Kang.
The complaint alleges that from October 2018 to September 2022, BKCoin raised around $100 million from 55 investors, promising to invest the funds in crypto assets. However, instead of investing the money as promised, BKCoin and Kang used some of it to make Ponzi-like payments and for personal use.
According to the complaint, BKCoin and Kang misrepresented to investors that their money would be used to trade crypto assets and generate returns for them. However, they disregarded the funds’ structure, commingled investor assets, and used over $3.6 million to make Ponzi-like payments to fund investors. Kang also allegedly misappropriated at least $371,000 of investor funds to pay for vacations, sporting events tickets, and a New York City apartment.
The complaint further alleges that Kang attempted to conceal the unauthorized use of investor funds by providing altered documents with inflated bank account balances to the third-party administrator for certain funds. Additionally, BKCoin allegedly misrepresented to some investors that the funds had received an audit opinion from a “top four auditor,” which was not true.
Eric I. Bustillo, Director of the SEC’s Miami Regional Office, stated that the defendants misappropriated investors’ money, created false documents, and engaged in Ponzi-like conduct. The SEC seeks permanent injunctions against both defendants, disgorgement, prejudgment interest, and a civil penalty from both defendants, as well as an officer and director bar and conduct-based injunction against Kang.
The SEC also named relief defendants, including each of the funds and Bison Digital LLC, an entity that allegedly received approximately $12 million from BKCoin and the funds, and seeks disgorgement from them. The court granted emergency relief against the relief defendants, including the appointment of a receiver.
The SEC’s investigation is ongoing and is being conducted by the Miami Regional Office under the supervision of Jessica M. Weissman, Fernando Torres, and Glenn S. Gordon, with assistance from Adrian Gonzalez, James Richardson, and Jean Cabot. The SEC’s litigation is being led by Pascale Guerrier under the supervision of Teresa Verges.
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, warning investors about the signs of fraud. Investors can find additional information about crypto asset investment schemes at Investor.gov.
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