SEC Busts BKCoin for Running $100M 'Ponzi-Like Scheme'

The US Securities and Exchange Commission (SEC) has received emergency relief from a Florida court to freeze and appoint a receiver of the assets of BKCoin and its Co-Founder, Kevin Kang. Announced on Monday, the Miami-based crypto hedge fund defrauded at least 55 investors after raising $100 million.

Both BKCoin and Kang have allegedly violated the antifraud provisions of the federal securities laws.

The SEC Takes Action against BKCoin

The US securities market regulator filed a sealed complaint against BKCoin and Kang on 23 February, which was sealed until Monday. The complaint alleged that Kang and his company assured investors their money would be invested in cryptocurrencies. In addition. the company guaranteed returns through separately managed accounts and five private funds.

However, in reality, commingled investor assets disregarding the fund's structure used more than $3.8 million for making Ponzi-like payments. Fraudsters use the proceeds from the new investors to pay off old ones in Ponzi schemes.

Moreover, the regulatory complaint alleged that Kang misappropriated at least $371,000 of investor money for personal use, including paying for vacations, purchasing sporting event tickets, and even buying a New York apartment. Further, one of the affiliates, Bison Digital LLC, received around $12 million from BKCoin.

The hedge fund even provided altered documents with inflated bank account balances to the third-party administrator of certain funds to conceal its fraudulent activities. In addition, it falsely informed clients about the audit by a big-four audit firm. However, in reality, none of its books were audited at the time.

Recovery In Process

The SEC is now seeking to recover the BKCoin investors' proceeds and penalties from the company and its co-founder. It is also seeking a permanent injunction against BKCoin and Kang.

"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 the Director of the SEC's Miami Regional Office, Eric Bustillo.

"This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena."

Recently, the SEC took action against several major crypto fraudsters. In January, the regulator brought charges against Neil Chandran for creating and running CoinDeal, a fraudulent investment scheme that raised $45 million by selling unregistered securities. It also charged algorithmic stablecoin issuer Terraform Labs and its CEO, Do Kwon, for running a "multi-billion dollar crypto asset securities fraud." Kwon is currently at large and wanted in South Korea.