SEC Freezes Assets Of Miami-Based Crypto Hedge Fund In $100 Million Crypto Fraud Case ⋆ ZyCrypto

Another day, another SEC enforcement action. The U.S. securities watchdog has just filed an emergency action against Miami-based investment adviser BKCoin in connection with an alleged $100 million fraud scheme.

$100M Ponzi-Like Scheme Defrauded At Least 55 Victims

The SEC has announced emergency action against crypto hedge fund BKCoin Management.

According to a Feb. 6 announcement, the regulator was given emergency relief by a Florida court to freeze and appoint a receiver for BKCoin’s assets. The SEC accused the company and one of its co-founders, Kevin Kang, of raising $100 million from 55 clueless investors to invest in cryptocurrencies — but instead squandered the funds on luxury items and to make “Ponzi-like payments”.

“As we allege, investors entrusted their money to the defendants to trade in crypto assets,” posited Eric Bustillo, director of the SEC’s Miami Regional Office. “Instead, the defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct. This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”

The SEC alleges Kevin Kang misappropriated approximately $371,000 in customer money to bankroll holidays, pay rent on his New York City apartment, and purchase tickets to sporting events. Kang tried to cover his tracks by giving clients fabricated documents with exaggerated bank account balances and also lying to them that a “top four auditor had audited BKCoin”, said the SEC announcement.

The complaint also claims that the defendants commingled client funds and used over $3.6 million to make payments to other investors. The SEC revealed it has already frozen the assets of BKCoin. The U.S. regulator now seeks permanent injunctions against the company and Kang, disgorgement, prejudgment interest, and a civil penalty. 

The SEC’s Monday enforcement action comes as the Commission has intensified the crackdown on crypto in the last year or so. Gary Gensler, who helms the SEC, has made it clear that he believes every coin — other than bitcoin — is an unregistered security.

Several high-profile firms are now in the SEC’s crosshairs. The agency has charged Terraform Labs founder Do Kwon with “orchestrating a multi-billion dollar crypto asset securities fraud”. Earlier this month, it also slapped U.S.-based crypto exchange Kraken with a $30 million fine for violating securities laws.