My Crypto Lawyer
The Securities and Exchange Commission today announced that it filed an emergency action in which it successfully obtained an asset freeze, appointment of a receiver, and other emergency relief against Miami-based investment adviser BKCoin Management LLC and one of its principals, Kevin Kang, in connection with a crypto asset fraud scheme. From at least October 2018 through September 2022, BKCoin raised approximately $100 million from at least 55 investors to invest in crypto assets, but BKCoin and Kang instead used some of the money to make Ponzi-like payments and for personal use.
According to the SEC’s complaint, filed under seal on February 23, 2023, and unsealed today, BKCoin and Kang assured investors that their money would be used primarily to trade crypto assets and represented that BKCoin would generate returns for investors through separately managed accounts and five private funds. As the complaint alleges, the defendants disregarded the structure of the funds, commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors. The complaint also alleges that Kang misappropriated at least $371,000 of investor money to, among other things, pay for vacations, sporting events tickets, and a New York City apartment. According to the complaint, Kang attempted to conceal the unauthorized use of investor money by providing altered documents with inflated bank account balances to the third-party administrator for certain of the funds. The complaint further alleges that BKCoin materially misrepresented to some investors that BKCoin, or one of the funds, received an audit opinion from a “top four auditor,” when in fact neither BKCoin nor any of the funds received an audit opinion at any time.
“As we allege, 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,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”
The SEC’s complaint, filed in the United States District Court for the Southern District of Florida, alleges that BKCoin and Kang violated the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions against both of the defendants; disgorgement, prejudgment interest, and a civil penalty from both of the defendants; and, an officer and director bar and conduct-based injunction against Kang. The complaint names as relief defendants, and seeks disgorgement from, each of the funds and Bison Digital LLC, an entity that allegedly received approximately $12 million from BKCoin and the funds. The court also granted emergency relief against the relief defendants, which the SEC sought, including appointment of a receiver.
The SEC’s continuing investigation is being conducted by Alexander Charap, Jeffrey Goldberg, and Julia D’Antonio in 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. Investors can find additional information about crypto asset investment schemes, including the warning signs of fraud, at Investor.gov.
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