SEC Files Emergency Action Against BKCoin for Running $100M ‘Ponzi-Like’ Scheme
BKCoin co-founder Kevin Kang is accused of misappropriating client funds to bankroll vacations, purchase tickets to sporting events and pay rent on his New York City apartment.
The U.S. Securities and Exchange Commission (SEC) was granted emergency relief by a Florida court on Monday to freeze and appoint a receiver for the assets of Miami-based crypto hedge fund BKCoin and one of its co-founders, Kevin Kang.
According to regulators, BKCoin and Kang raised $100 million from over 50 investors, and used a portion of investor funds to make “Ponzi-like payments” and for personal use.
BKCoin and Kang promised investors their money would be used to trade crypto, and that funds would be held in separately managed accounts, said the SEC. However, Kang and BKCoin allegedly commingled client money and used at least $3.6 million to make payments to other investors.
The SEC’s action comes five months after BKCoin’s core legal entity, BKCoin Management LLC, filed suit in a Florida circuit court alleging that Kang had “improperly diverted'' $12 million in cash and other assets out of BKCoin’s multi-strategy funds. Kang was fired from BKCoin on Oct. 14.
The SEC has accused Kang of misappropriating at least $371,000 in customer funds for his personal use, including paying for vacations, tickets to sporting events and rent on his New York apartment. According to the SEC, Kang tried to cover his tracks by giving investors falsified documents with “inflated bank account balances.” He also allegedly told investors that BKCoin had been audited by a “top four auditor,” which the SEC said never happened.
The SEC is seeking permanent injunctions against both BKCoin and Kang, as well as disgorgement, prejudgement interest, and a civil penalty. The SEC is also seeking disgorgement from Bison Digital LLC, an entity that allegedly received $12 million from BKCoin’s investor funds.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.