A Miami-based investment adviser to offshore crypto investment funds engaged in fraud, the U.S. Securities and Exchange Commission (SEC) alleges.
In an emergency action, the SEC secured an asset freeze, the appointment of a receiver and other urgent relief against BKCoin Management LLC and one of the firm’s principals, Kevin Kang. The firm is facing allegations that it raised US$100 million from investors to invest in crypto but used some of that money to make payments to early investors.
According to the SEC, Kang co-founded BKcoin in 20l8, “ostensibly for advising domestic and offshore investment funds focused primarily on investing in cryptoassets.”
Over the next four years, it formed five investment funds in the British Virgin Islands that were offered to investors, with BKcoin serving as the funds’ adviser to trade in cryptoassets using various strategies.
However, the SEC alleged that “tens of millions of dollars are unaccounted for.”
According to the SEC’s complaint, investors were told their money would be used to trade cryptoassets through separately managed accounts and its five private offshore investment funds.
However, regulators alleged that BKCoin and Kang “disregarded the structure of the funds, commingled investor assets, and used more than US$3.6 million to make Ponzi-like payments to fund investors.”
It also alleged that Kang misappropriated at least US$371,000 for personal use, which he aimed to conceal using “altered documents with inflated bank account balances to the third-party administrator for certain of the funds.”
The SEC’s complaint seeks permanent injunctions, disgorgement and a civil penalty from both of the defendants, as well as an officer and director ban against Kang.
None of the allegations have been proven.