By executing a $100 million “Ponzi-like fraud,” BKCoin was found by the SEC.
More than $3.8 million was used in the Ponzi-like payments made by the scam.
At least $371,000 was spent on personal expenses by one co-founder.
A Florida court has granted emergency relief to the US Securities and Exchange Commission (SEC) allowing it to freeze and appoint a receiver over the assets of BKCoin and its co-founder, Kevin Kang. The Miami-based cryptocurrency hedge fund, which was revealed on Monday, raised $100 million before defrauding at least 55 investors.
The federal securities laws’ antifraud provisions are allegedly broken by both BKCoin and Kang.
Actions by the SEC Against BKCoin
On February 23, the US securities market watchdog filed a complaint in secret against BKCoin and Kang. The complaint remained secret until this past Monday. According to the lawsuit, Kang and his business promised investors that their funds would be invested in cryptocurrencies. Moreover, the business provided return guarantees through five private funds and independently managed accounts.
Although the fund’s structure was disregarded, combined investor assets actually utilised more than $3.8 million to make Ponzi-like payouts. In Ponzi schemes, fraudsters utilise the money from new investors to repay previous ones.
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Moreover, it was claimed in the regulatory complaint that Kang stole at least $371,000 from investors for personal expenses including holidays, sporting event tickets, and even the purchase of an apartment in New York. Moreover, Bison Digital LLC, one of the affiliates, earned close to $12 million from BKCoin.
To hide its illegal actions, the hedge fund even sent fabricated paperwork with inflated bank account balances to the third-party administrator of some funds. Moreover, it misled clients on the audit conducted by a big-four audit company. In actuality, none of its books at the time were audited.
The SEC is currently pursuing the firm and its co-founder to recoup the money and fines from the BKCoin investors. Moreover, it asks for a long-term injunction against Kang and BKCoin.
“Investors entrusted the defendants with their funds to trade in crypto assets, as we say. Instead, the defendants stole their money, falsified paperwork, and even practised Ponzi schemes “said Eric Bustillo, the director of the SEC’s Miami Regional Office.
Our move demonstrates our ongoing dedication to safeguarding investors and rooting out fraud throughout the entire securities industry, including the world of crypto assets.
The SEC recently prosecuted a number of significant cryptocurrency scammers. Neil Chandran was charged in January by the regulatory body for founding and running CoinDeal, an illegal investment scam that generated $45 million by selling unregistered securities. Also, it accused Terraform Labs, a provider of algorithmic stablecoins, and its CEO, Do Kwon, of operating a “multi-billion dollar crypto asset securities scam.” In South Korea, Kwon is now fugitive and sought.