Latest action targets Miami firm BKCoin

The US Securities and Exchange Commission is not wavering in its crypto regulatory war, as another week brings another round of enforcement.

On March 6, the SEC announced its latest emergency action against Miami-based investment advisor BKCoin Management.

The regulator’s latest salvo in the war on crypto included an asset freeze. Furthermore, it accused the company and one of its principals, Kevin Kang, of orchestrating a $100 million crypto fraud scheme from October 2018 to September 2022.

It stated that the firm raised funds from at least 55 investors to invest in crypto assets. “BKCoin and Kang instead used some of the money to make Ponzi-like payments and for personal use,” it added.

Misuse of funds

According to the complaint, the firm will generate profits for investors with crypto investments and five private funds.

However, the defendants disregarded the structure of the funds. They “commingled investors’ assets and used more than $3.6 million to make Ponzi-style payments to fund investors,” it added.

Kang also used at least $371,000 of investor money to pay for vacations, tickets to sporting events and an apartment in New York City.

Furthermore, he attempted to conceal the use of investor money by providing “altered documents with inflated bank account balances to the third-party administrator,” the complaint said.

Director of the SEC’s Miami Regional Office, Eric Bustillo, said:

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

The regulator is now seeking permanent injunctions against BKCoin and Kang. It will also impose a civil penalty against both defendants. It also seeks disgorgement from each of the funds and Bison Digital LLC, “an entity that allegedly received approximately $12 million from BKCoin.”

The war over crypto regulation intensifies

The SEC has stepped up its war on crypto in the wake of the FTX collapse in November. In January, the agency filed enforcement actions against Genesis and Gemini, and it followed up with a $30 million fine for Kraken in February.

Other firms currently in SEC scope include Coinbase, Binance and Paxos, with floating-rate platform Lido and stablecoin issuer Circle possibly on the target list.

SEC Chairman Gary Gensler has publicly stated several times that he believes all crypto assets except BTC are securities. However, the US Congress has yet to introduce formal legislation to officially classify them as such.

This has caused a wave of criticism from industry experts and executives. Many of them disagree with this “carpet bombing” of the industry and regulation by enforcement rather than promoting fintech innovation. Cracking down on industry fraudsters, however, is not without objection.

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