Florida Court Grants SEC Emergency Action To Shutdown BKCoin For $100M ‘Ponzi-Like’ Scheme

The U.S. Securities and Exchange Commission (SEC), with the approval of a Florida court, has successfully frozen the assets of a Miami-based investment adviser BKCoin Management LLC and one of its founders over an alleged $100 million crypto fraud scheme.

“The Securities and Exchange Commission today announced that it filed an emergency action in which it successfully obtained an asset freeze, the appointment of a receiver, and other emergency relief against BKCoin and one of its founders Min Woo “Kevin Kang” for the alleged fraud and misusing investor funds,” the regulator said in a press release.

The case, which was filed in federal court in Miami on Feb. 23 was unsealed Monday and alleged that Kang and the crypto hedge fund BKCoin raised almost $100 million from investors and violated securities law with its “Ponzi-like” payments, which reportedly took place between October 2018 and September 2022.

According to the SEC, both BKCoin and Kang assured investors that their funds would be utilized to trade cryptocurrencies and would be held in separately managed accounts, but the truth is that BKCoin and Kang co-mingled investors’ funds and used approximately $3.6 million to pay other investors, the U.S. financial regulator disclosed.

The crypto hedge fund co-founder was also accused by the SEC of spending nearly $400,000 on investor funds for himself, which includes a $35,000 payment for rent in a vacation house in Montauk, New York.

The financial regulator also alleged that Kang tried to cover his tracks by providing investors with falsified documents showing “inflated bank account balances” and telling them that BKCoin had been audited by a “top four auditor,” which according to the SEC, did not happen at all.

“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 even engaged in Ponzi-like conduct,” SEC’s Miami Regional Office director Eric I. Bustillo said.

“This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”

The SEC’s emergency action against BKCoin happened five months after the crypto hedge fund’s core legal entity BKCoin Management LLC filed a lawsuit against Kang for improperly diverting around $12 million in cash and other assets of the company’s multi-strategy funds.

BKCoin fired Kang on Oct. 14, 2022.

Aside from disgorgement, prejudgement interest, and a civil penalty, the SEC is also seeking permanent injunctions against BKCoin and Kang and disgorgement from Bison Digital LLC, a Portuguese bank-backed virtual asset service provider, which allegedly received $12 million from BKCoin’s investor funds.