SEC Alleges BKCoin Collected From Crypto Investors, Ran Fraud Scheme

The SEC continued its enforcement spree on the crypto sector Monday by going after a Miami-based investment adviser the agency claims ran a fraud scheme. 

BKCoin Management raised roughly $100 million from at least 55 investors to invest in cryptoassets between October 2018 and September 2022, the SEC said Monday. 

The company and one of its principals, Kevin Kang, used $3.6 million to make “Ponzi-like payments,” the commission alleges in a complaint filed in the United States District Court for the Southern District of Florida. Kang also used at least $371,000 of investor money to pay for vacations, sporting events tickets, and a New York City apartment.

BKCoin and Kang assured investors their money would be used primarily to trade cryptoassets and generate returns via separately managed accounts and five private funds, according to the SEC. The firm misrepresented to some investors that it received an audit opinion from a “top four auditor,” the agency’s complaint adds. 

“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,” Eric Bustillo, director of the SEC’s Miami regional office, said in a statement.

The SEC has obtained an asset freeze against BKCoin Capital and appointed a receiver — a neutral party appointed by a judge to manage another party’s affairs. The complaint seeks permanent injunctions, disgorgement, prejudgment interest and a civil penalty from the defendants.  

Kang and the company did not immediately return a request for comment. 

BKCoin Capital in June hired Paul Magahis as president, Adriano Caloiaro as chief technology officer and Leanna Haakons as director of business development and investor relations. The firm said that month its diversified investment platform had more than $145 million in assets under management.

CoinDesk reported in December, Kang was fired from the company in October for allegedly misappropriating $12 million in assets from three multi-strategy funds, according to filings.

A BKCoin Management founder engaged with John Annesser — a partner at law firm Annesser Armenteros — after discovering irregularities with respect to the actions of one of its managing members, Annesser told Blockworks in an email. After an internal investigation, the company contacted the SEC and law enforcement agencies to self-report what had been discovered and seek the appointment of a receiver, he added. 

“At all times prior to the appointment of a receiver, both BKCoin Management and the reporting founding partner have fully cooperated with all requests from both regulatory and law enforcement agencies,” Annesser added. “Due to the ongoing cases, no further comment will be made at this time.”

Monday’s SEC enforcement action comes as the agency has ramped up its focus on the crypto space over the last year. 

The SEC last month charged Terraform Labs and CEO Do Kwon for allegedly “orchestrating” cryptocurrency securities fraud. A week earlier, crypto exchange Kraken agreed to settle with the SEC for $30 million over its staking products.

Updated March 6, 2023 at 6:00 pm: Added comments from John Annesser, partner at law firm Annesser Armenteros.

---

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.