The U.S. Securities and Exchange Commission (SEC) has taken emergency action against Miami-based investment adviser Bkcoin and one of its principals, Kevin Kang, for their alleged involvement in a $100 million crypto fraud scheme. The SEC alleges that Bkcoin and Kang “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 SEC’s action includes an asset freeze, appointment of a receiver, and other emergency relief against Bkcoin and Kang. The regulator detailed that from at least October 2018 through September 2022, Bkcoin raised approximately $100 million from at least 55 investors to invest in crypto assets.
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. However, the defendants allegedly misused investor funds and made material misrepresentations to some investors by falsely claiming that either the company or one of its funds had received an audit opinion from a “top four auditor.”
The complaint alleges that Kang misappropriated at least $371,000 of investor money to pay for vacations, sporting event tickets, and a New York City apartment, among other things. Kang also allegedly 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 SEC seeks permanent injunctions against both defendants, as well as disgorgement, prejudgment interest, and a civil penalty. In addition, the complaint calls for an officer and director bar and conduct-based injunction against Kang.
The SEC’s action against Bkcoin and Kang highlights the risks associated with investing in the cryptocurrency market. The SEC has repeatedly warned investors about the risks of investing in initial coin offerings (ICOs) and other digital assets.
Investors should always conduct thorough due diligence before investing in any asset, including cryptocurrencies. They should also be cautious of investment opportunities that promise high returns with little or no risk.
The SEC’s action against Bkcoin and Kang serves as a reminder that the regulator will take swift action against those who violate securities laws and defraud investors.
The cryptocurrency market has seen significant growth in recent years, with the total market capitalization of all cryptocurrencies surpassing $2 trillion in 2021. However, the market remains largely unregulated, making it susceptible to fraud and abuse.
Investors should work with reputable investment advisers and platforms when investing in cryptocurrencies. They should also stay informed about regulatory developments and be wary of fraudulent schemes.