SEC Freezes Assets of Investment Advisor BKCoin, Alleges $100M Crypto Fraud Scheme

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The U.S. Securities and Exchange Commission on Monday announced emergency action against Miami-based investment adviser BKCoin Management LLC and one of its executives, Kevin Kang, alleging a crypto-asset fraud scheme.

The SEC said it successfully secured 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 on Monday.

Between October 2018 and September 2022, BKCoin raised approximately $100 million from at least 55 investors to invest in crypto, but the company and Kang reportedly used the money for personal gain and Ponzi-like payments, the SEC said in a press release. A Ponzi scheme is a type of fraud that pays out profits to previous investors with funds collected from new investors.

As we claim, the investors entrusted their money to the defendants to trade crypto assets. Instead, the defendants embezzled their money, created false documents and even engaged in Ponzi-type conduct, Eric I. Bustillo, SEC Miami Regional Office Director, said in a statement.

The SEC said the complaint, filed in the U.S. District Court for the Southern District of Florida, seeks permanent injunctions against the two defendants; restitution of throat, prejudgment interest and civil penalty from both defendants; and, an injunction based on the bar and the conduct of an officer and administrator against Kang.

Restitution is a remedy that forces a party who profited from illegal acts to forfeit any profits they made, and prejudgment interest is the interest a creditor is entitled to collect.

Attorneys for BKCoin and Kangs 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, according to the SEC statement. But Kang and BKCoin allegedly used 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. 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 company also told investors that BKCoin or one of the funds received an audit notice when it did not, according to the SEC filing. An audit opinion is an independent auditor’s report that accompanies the financial statements.

This action underscores our continued commitment to protecting investors and rooting out fraud in all securities industries, including the realm of crypto assets, Bustillo said in a statement.

This is just the latest crypto crackdown from the SEC. Last month, the company charged former NBA player Paul Pierce $1.4 million for promoting crypto tokens without disclosing that he was paid for the promotion, and accused 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 for this article.

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