Miami Investment Adviser BKCoin and Principal Kevin Kang face Serious Charges by SEC
The Securities and Exchange Commission (SEC) made the announcement today that it had initiated an emergency action in which it was successful in obtaining an asset freeze, the appointment of a receiver, and other forms of emergency relief against the Miami-based investment adviser BKCoin Management LLC and one of its principals, Kevin Kang, in connection with a fraudulent scheme involving cryptocurrency assets.
BKCoin solicited funding from at least 55 investors totaling approximately $100 million between the months of October 2018 and September 2022, with the intention of using the funds to purchase cryptographic assets; however, BKCoin and Kang instead used some of the funds to make Ponzi-like payments and for their own personal use.
According to the complaint that BKCoin and Kang filed with the SEC on February 23, 2023, under seal, and which was unsealed today, 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.
The complaint was unsealed today. According to the allegations made in the complaint, the defendants disregarded the structure of the funds, mixed up the assets owned by investors, and used more than $3.6 million to make payments to fund investors in a Ponzi-like scheme. In addition, the complaint states that Kang stole at least $371,000 from investors and used it, among other things, to pay for vacations, tickets to sporting events, and an apartment in New York City.
According to the allegations contained in the complaint, Kang made an attempt to cover up the unlawful use of investor funds by providing altered documents to the third-party administrator for certain of the funds that he managed that contained inflated bank account balances.
The complaint further alleges that BKCoin materially misrepresented to some investors that BKCoin or one of the funds received an audit opinion from a “top four auditor,” when in fact neither BKCoin nor any of the funds received an audit opinion at any time. Additionally, the complaint alleges that BKCoin materially misrepresented to some investors that BKCoin or one of the funds received an audit opinion from a “top four auditor.”
According to our allegations, investors gave the defendants their money so that they could trade in crypto assets. Instead, the defendants engaged in Ponzi-like behavior, created false documents, and misappropriated the victims’ money, according to Eric I. Bustillo, Director of the SEC’s Miami Regional Office. This action demonstrates our ongoing commitment to protecting investors and eradicating fraud in all securities sectors, including the arena of crypto assets,” said the company in a statement.
The SEC has filed a complaint in the United States District Court for the Southern District of Florida alleging that BKCoin and Kang violated the antifraud provisions of the federal securities laws. The complaint alleges that these violations took place.
The complaint requests that permanent injunctions be issued against both of the defendants, as well as disgorgement, prejudgment interest, and a civil penalty from both of the defendants. Additionally, the complaint requests that Kang be barred from serving as an officer or director, and that he be subject to a conduct-based injunction.
The complaint names as relief defendants both the funds and Bison Digital LLC, an entity that is alleged to have received approximately $12 million from BKCoin and the funds combined. The complaint also seeks disgorgement from both of these entities. In addition, the court granted the SEC’s request for emergency relief against the relief defendants, which included the appointment of a receiver.
Alexander Charap, Jeffrey Goldberg, and Julia D’Antonio of the Miami Regional Office of the SEC are currently leading the ongoing investigation. They are working under the direction of Jessica M. Weissman, Fernando Torres, and Glenn S. Gordon, and they are receiving assistance from Adrian Gonzalez, James Richardson, and Jean Cabot. The investigation is being supervised by Jessica M. Weissman.
Pascale Guerrier, who reports to Teresa Verges, is in charge of managing the litigation for the Securities and Exchange Commission.
An Investor Alert on Digital Asset and Crypto Investment as well as an Investor Alert on Pyramid Schemes Posing as Multi-Level Marketing Programs have both been issued by the Securities and Exchange Commission’s Office of Investor Education and Advocacy and Enforcement’s Retail Strategy Task Force, respectively. Investors can find additional information about investment schemes involving crypto assets, including the warning signs of fraud, at the website Investor.gov.
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