The U.S. Securities and Trade Fee introduced an emergency motion on Monday towards Miami-based funding adviser BKCoin Administration LLC and one in all its principals, Kevin Kang, alleging a crypto-asset fraud scheme.
The SEC stated it efficiently obtained an asset freeze, appointment of a receiver, and different emergency aid. The SEC stated 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 at the very least 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 stated in a information launch. A Ponzi scheme is a sort 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 an alternative, the defendants misappropriated their cash, created false paperwork, and even engaged in Ponzi-like conduct,” stated Eric I. Bustillo, director of the SEC’s Miami regional workplace, in a press release.
The SEC stated the grievance, 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.
BKCoin and Kang’s legal professionals didn’t instantly reply to requests for remark.
BKCoin and Kang had instructed traders that their cash can be used to commerce crypto and that BKCoin would generate returns via managed accounts and 5 non-public funds, the SEC assertion stated. However Kang and BKCoin allegedly used greater than $3.6 million to make Ponzi-like funds to fund traders, in keeping with the SEC.
The complain additionally alleges that Kang used at the very least $371,000 of investor cash to pay for private bills like holidays, sporting occasions, and a New York Metropolis condominium. He tried to cover the unauthorized use of the cash by altering paperwork with “inflated checking account balances to the third-party administrator,” in keeping with the SEC.
The agency additionally instructed traders that BKCoin or one of many funds had acquired an audit opinion when it hadn’t, in keeping with 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 area,” stated Bustillo, in a press release.
That is simply the most recent 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 preferred crypto change, which was hit with a $30 million effective for failing to register its crypto staking program earlier this month.
—Frances Yue contributed reporting to this text.