The Securities and Exchange Commission (SEC) continues its crypto crackdown prosecutions, which seem to have no end in sight. In its most recent move, the crypto-skeptic American regulator has launched an emergency action against Miami-based BKCoin Management LLC and its principal, Kevin Kang, for allegedly orchestrating a $100 million crypto fraud scheme.
According to regulators, BKCoin and Kang raised the money in question from over 50 investors and used a fraction of the funds to make “Ponzi-like payments” and for personal use.
Kang was also accused of squandering investor funds to pay for vacations and trips, as well as a property in New York City and other costs totaling roughly $370,000.
The SEC said that BKCoin and Kang made promises to investors that their money would be maintained in independently managed accounts and used for cryptocurrency trading. However, Kang and BKCoin reportedly mishandled customer funds and misappropriated at least $3.6 million to make payments to other investors.
BKCoin and Kang Misled Investors
The hedge fund further misled investors by claiming to have secured an audit opinion from one of the “top four auditors,” when in fact neither BKCoin nor any of the funds ever did.
While addressing the firm’s ongoing irregularities, Eric I. Bustillo, Director of the SEC’s Miami Regional Office, was cited as saying,
“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.”
The SEC has long had a strict stance on the cryptocurrency sector. Since 2018, the Commission has focused on unregistered securities transactions such as token sales and initial coin offerings (ICOs), a type of cryptocurrency capital raising.
In particular, following FTX, the SEC has taken aggressive steps to guarantee that the economic environment remains stable, even though these steps have occasionally been severe. The SEC lawsuit was the most recent enforcement action brought against a cryptocurrency corporation or individual, citing violations of the federal securities laws’ antifraud provisions.
The regulator said that it has already frozen assets and procured other emergency relief against the company. The Commission is now asking for disgorgement, prejudgment interest, civil penalties, and permanent injunctions against BKCoin and Kang. Additionally, it asks for a conduct-based injunction against Kang as well as an officer and director bar.