The United States Securities and Exchange Commission (SEC) has filed an emergency action against Miami Investment Adviser, BKCoin Management LLC.
In what comes as the latest in the series of enforcement actions from the regulator, it said BKCoin Management and its core principal, Kevin Kang were involved in a crypto asset fraud scheme.
According to the regulator, the company raised approximately $100 million from 55 investors with the funds originally designed to be invested in crypto assets. Rather than use the funds for this purpose, BKCoin Management diverted the investment to other personal luxury materials and then began making Ponzi-like payments.
The SEC specifically pointed out that Kang and his team misappropriated at least $371,000 of investor’s money to pay for holidays, and apartments. The sophistication of their fraudulent scheme was even showcased with the falsification of documents in an attempt to cover their tracks.
“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,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”
The SEC said BKCoin used about $3.6 million to make Ponzi-like payments, a scheme that was easily recognized by the investigators. In its enforcement action, the regulator noted that it has been able to freeze some of the assets of the company while as announced, it has obtained emergency relief against the firm.
Besides this, the SEC said it will be charging the company and its principals to pay for “disgorgement, prejudgment interest, and a civil penalty from both of the defendants; and, an officer and director bar and conduct-based injunction against Kang.”
SEC Has Been in Action Before BKCoin Crackdown
One thing is clear about the Gary Gensler-led SEC, and that is the fact that there are a lot of crackdowns that have been meted out against companies in the digital currency ecosystem.
The commission’s defense is that it is trying to safeguard investors from fraudulent endeavors but proponents in the emerging industry are already seeing the excessiveness in the regulator’s actions.
Besides the crackdowns on the likes of Grayscale Investments and Genesis earlier this year, the SEC has also gone after what many see as innocent companies including Kraken Exchange and Paxos Trust, the issuer of the Binance USD (BUSD) stablecoin.
In the case of Kraken, the company was accused of offering its staking product as an unregistered security while it tagged the BUSD stablecoin as a security also. Both firms have halted the offerings of these two products. However, industry experts seem concerned that more industry players will be charged by the regulator for an offense they do not currently know that they have committed.