The U.S. Securities and Trade Fee introduced an emergency motion on Monday towards Miami-based funding adviser BKCoin Administration LLC and one among its principals, Kevin Kang, alleging a crypto-asset fraud scheme.
The SEC mentioned it efficiently obtained an asset freeze, appointment of a receiver, and different emergency aid. The SEC mentioned the emergency motion was filed below seal on Feb. 23 and unsealed Monday.
Between October 2018 and September 2022, BKCoin raised round $100 million from no less than 55 traders to put money into crypto, however the agency and Kang allegedly used the cash for private use and Ponzi-like funds, the SEC mentioned in a information launch. A Ponzi scheme is a kind of fraud that pays earnings to earlier traders with funds raised from newer traders.
“As we allege, traders entrusted their cash to the defendants to commerce in crypto property. As a substitute, the defendants misappropriated their cash, created false paperwork, and even engaged in Ponzi-like conduct,” mentioned Eric I. Bustillo, director of the SEC’s Miami regional workplace, in a press release.
The SEC mentioned the criticism, filed in U.S. District Courtroom for the Southern District of Florida, seeks everlasting injunctions towards each of the defendants; disgorgement, prejudgment curiosity, and a civil penalty from each of the defendants; and, an officer and director bar and conduct-based injunction towards Kang.
Disgorgement is a treatment that requires a celebration who profited from unlawful acts to surrender any earnings they made, and prejudgment curiosity is the curiosity {that a} creditor is entitled to gather.
BKCoin and Kang’s legal professionals didn’t instantly reply to requests for remark.
BKCoin and Kang had informed traders that their cash can be used to commerce crypto and that BKCoin would generate returns by means of managed accounts and 5 non-public funds, the SEC assertion mentioned. However Kang and BKCoin allegedly used greater than $3.6 million to make Ponzi-like funds to fund traders, in response to the SEC.
The complain additionally alleges that Kang used no less than $371,000 of investor cash to pay for private bills like holidays, sporting occasions, and a New York Metropolis condo. He tried to cover the unauthorized use of the cash by altering paperwork with “inflated checking account balances to the third-party administrator,” in response to the SEC.
The agency additionally informed traders that BKCoin or one of many funds had obtained an audit opinion when it hadn’t, in response to the SEC submitting. An audit opinion is an unbiased auditor’s report that accompanies monetary statements.
“This motion highlights our continued dedication to defending traders and uprooting fraud in all securities sectors, together with the crypto asset enviornment,” mentioned Bustillo, in a press release.
That is simply the newest crypto crackdown by the SEC. Final month, the agency charged former NBA participant Paul Pierce $1.4 million for selling crypto tokens with out disclosing he was being paid for the promotion, and charged Terraform Labs and CEO Do Kwon with defrauding crypto traders. The SEC has cracked down on crypto exchanges, together with Kraken, a well-liked crypto trade, which was hit with a $30 million positive for failing to register its crypto staking program earlier this month.
—Frances Yue contributed reporting to this text.
