SEC Freezes BKCoin And Grants Emergency Funding

Updated: 08 March 2023

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The SEC Chair, Gary Gensler, stays true to his words as he continues his mission of cracking down on crypto-related platforms. On Tuesday, the U.S. Securities and Exchange Commission filed an emergency action against BKCoin and its founder Kevin Kang, for an alleged crypto fraud scheme. The SEC has revealed that the Miami-based investment adviser BKCoin Management raised about $100 million from 55 investors to invest in the crypto assets. However, BKCoin and Kang instead used some of the funds to make Ponzi-like payments and personal use. This is alleged to take place between October 2018 and September 2022.

Today we announced that we successfully obtained an asset freeze, appointment of a receiver, and other emergency relief against Miami-based investment adviser BKCoin Management LLC and Kevin Kang, in connection with a crypto asset fraud scheme.

— U.S. Securities and Exchange Commission (@SECGov) March 6, 2023

However, the agency obtained an asset freeze, the appointment of a receiver, and other emergency relief against BKCoin. SEC’s crackdown on the platform comes under suspicion that the company and Kang might be running a fraud scheme. Kang, a 33-year-old New Yorker, launched BKCoin in 2018. He assured customers their funds would primarily be used to trade crypto assets. Notably, he touted that the platform would generate returns for investors through separately managed accounts and five private funds.

According to the SEC, Kang neglected his claimed fund structure. He commingled the customer assets and cultivated the company into a giant Ponzi scheme. He used over $3.6 million to make Ponzi-like payments to fund investors. Kang further went ahead to fetch some funds for his personal use. The SEC complaint alleges that Kang used approximately $371 000 to pay for vacations, sporting event tickets, and purchase a New York apartment.

Moreover, Kang attempted to enclose the unauthorized use of investor funds by providing altered documents with inflated bank account balances. Besides, he lied to investors that a “top-four auditor” audited the company’s books. In reality, none of the firm’s funds had received any audit.

SEC executive remarks on the fraud scheme

SEC’s Regional director, Eric I. Bustillo, gave his comments, noting:

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 engaged in Ponzi-like conduct. This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.

However, the regulators charged Kang with several counts, including violating the Securities Act and Adviser’s Act. Additionally, the SEC seeks permanent injunctions against BKCoin and Kang disgorgement, prejudgment interest, and a civil penalty.

Gary Gensler’s crusade on cracking down crypto-related platforms

The SEC under Chair Gary Gensler, has recently intensified its crackdown on crypto platforms. He believes that every coin and token apart from Bitcoin is an unregistered security. Recently, the SEC fined the crypto exchange Kraken $30 million, ordering it to shut down its staking program on the platform. However, despite the SEC crackdown, Kraken revealed it is launching its bank very soon.

Apart from Kraken, the SEC sued Paxos and ordered it to cease minting BUSD, a Binance stablecoin. The agency alleged that BUSD is an unregistered security. However, Paxos has issued BUSD, a U.S. dollar-collateralized stablecoin, since 2019. It is also the third largest stablecoin globally by market capitalization.

Nonetheless, the SEC is reportedly sending out subpoenas to NFT projects. The agency hopes to uncover potential violations of federal securities laws related to the sale of NFTs, especially after FTX’s demise.