US SEC freezes assets of BKCoin for orchestrating crypto fraud scheme

US SEC freezes assets of BKCoin for orchestrating crypto fraud scheme
  • The US SEC filed an emergency action against a crypto hedge fund alledging crypto fraud
  • The commission claims that the firm and its former co-founder misappropriated investor funds

The United States Securities and Exchanges Commission (SEC) announced that it filed an emergency action against BKCoin Management LLC – a crypto-hedge fund. Additionally, the action extends to its co-founder – Kevin Kang. The co-founder was fired in December 2022 over allegations of misappropriating customer funds to the extent of $12 million. The commission claims that BKCoin and Kang used customers $100 million “to make Ponzi-like payments and for personal use.”

The US regulatory body stated that it has the authority to freeze the assets of BKCoin and Kevin Kang via the filed emergency action. Moreover, the commission received the appointment of a receiver and other emergency relief. In a press release, the SEC said,

“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.”

Crypto fraud case against BKCoin and former executive

The filing stated that both parties claimed to use investors’ funds to trade crypto and make returns via separate accounts and five private funds. However, BKCoin and Kang allegedly “commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors.”

Moreover, SEC alleges that Kang used investor funds for vacations, a New York City apartment, and other things. The SEC claims that these expenses came up to nearly $371,000. And, Kang covered the deficit by giving “altered documents with inflated bank account balances to the third-party administrator for certain of the funds.”

In addition, the crypto hedge fund allegedly claimed to have received an audit opinion from one of the big fours. Whereas, in reality, neither the firm nor its funds get an audit opinion. The press release further read,

“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 (…)”

The case against BKCoin co-founder

Notably, Kevin Kang has been under the regulatory lens prior to the SEC action. A US Circuit Court filing in Florida alleged that the BKCoin co-founder misappropriated $12 million in assets from the multi-strategy fund. This resulted in Kang getting fired from the crypto-hedge fund in October 2022. Additionally, BKCoin’s emergency petition asking the court to appoint a receiver, claiming to be incapable of managing the assets. The filing read,

“In and around October 2022, BKCoin Management learned that Mr. Kang had engaged in certain suspicious and/or improper acts with regard to the management of the Multi-Start funds in contravention to the IMA, and that certain assets of the Multi-Start Funds were being improperly diverted by Mr. Kang (…)”

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