By Michael Scott
The Florida Court issued a favorable relief to the Securities and Exchange Commission (SEC) petition seeking to place BKCoin under receivership for operating a Ponzi-like investment Scheme.
BKCoin Facilitated Fraudulent scheme
The immediate action sought by the enforcement action against BKCoin alleging the firm ran a $100M ‘ponzi-like’ scheme.
SEC sought relief against BKCoin and Kevin Kang, its co-founder, alleging the parties jointly misappropriated users’ funds by bankrolling holiday vacations. The securities watchdog accused Kang of aiding the acquisition of tickets for executives attending sporting events. The allegations against the co-founder indicated that BKCoin settled rent expenses for Kang’s apartment in New York City.
Freeze Order and Appointment of Receiver Manager
The ruling issued by the Florida Court on March 6 directed the SEC to freeze the assets of the Miami-based hedge fund. The ruling further instructed SEC to place the crypto hedge fund assets under receivership the agency would appoint. Also affected by the ruling is Kang, whose assets will be placed under the same receiver.
The regulators’ petition demonstrated that Kang and BKCoin net $100M from investors exceeding 50. The documents annexed to the filing indicated that BKCoin would allocate a percentage of the investor funds to settle ponzi-like payments and fund personal expenditures.
SEC claims illustrate that Kang and BKCoin misinformed investors that they would utilize their contributed funds in crypto trading.
SEC Alleges Cunning Leadership Offered by Kang
SEC alleges that Kang assured the investors that separate management would be utilized for funds collected. On the contrary, Kang would lead BKCoin into commingling the users’ money. Subsequently, BKCoin would allocate $3.6 million to settle payments to other users.
The emergency action sought by the SEC is 150 days following the BKCoin Management LLC initiated suit before the Florida Circuit court claiming that Kang improperly rerouted $12 million in assets from the BKCoin multi-strategy funds. BKCoin would hand over the matching orders to Kang on October 14.
The documents presented during the petition filing indicate that Kang misappropriated $371000 of the users’ funds to fund personal utilization. SEC discloses that Kang attempted to conceal his tracks. The regulator argued that Kang would issue falsified documents showing inflated balances within their accounts.
SEC Seeks Permanent Injunctions
SEC filing demonstrates that Kang misdirected investors that BKCoin had engaged a top four-tier audit firm. SEC is dismissing such engagements.
Besides the permanent injunctions sought against the parties, SEC seeks prejudgment interest and a civil penalty. SEC is seeking Bison Digital LLC disgorgement, alleging that the entity benefited with $12 million from BKCoin’s users’ funds.