The U.S. Securities and Exchange Commission (SEC) has filed an emergency lawsuit against Miami-based financial advisory firm BKCoin Management LLC and its co-founder Kevin Kang, alleging they defrauded investors of $100 million through a fraudulent encryption scheme.
The agency sought financial penalties against the group and a conduct-based injunction against Kang. In a recent press release, the U.S. securities regulator said BKCoin raised approximately $100 million from at least 55 investors between October 2018 and September 2022. The company and one of its founders, Kevin Kang, assure clients that their funds will be traded in cryptocurrencies, promising a solid return on investment.
Instead, the SEC recommended that defendants ignore the outlined scheme and use $3.6 million of the total to make Ponzi payments, with Kang allegedly stealing more than $370,000 to pay for vacations, tickets to sporting events, and even a property in New York City.
The complaint alleges that BKCoin lied to users that it had received an audit opinion from a “Big Four auditor,” when in reality, it never received such a notion. “As we allege, the investors entrusted their money to the defendants to trade crypto assets. Instead, the defendants embezzled their money, forged documents, and even conducted a Ponzi-like scheme.
This action underscores our continued commitment to protecting investors and rooting out fraud in all securities, including crypto assets," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. As part of an emergency operation, regulators froze some assets belonging to BKCoin. It accused the company and Kang of violating the antifraud provisions of the federal securities laws and upheld a permanent injunction against both defendants. It is also seeking ill-gotten gains from Bison Digital LLC, a virtual asset service provider that allegedly received $12 million from BKCoin.
Regulators have accused eight individuals (Neil Chandran is one) and several entities of extracting $45 million from investors through a fraudulent cryptocurrency scheme called CoinDeal. It claims the suspects used the money to buy property, cars and a boat.
“We allege that the defendants falsely represented that valuable blockchain technology was available and that the imminent sale of the technology would yield investors a return on investment of more than 500,000 times. In reality, as we allege in our complaint, this was simply an elaborate scheme in which defendants became rich while defrauding tens of thousands of retail investors," commented Daniel Gregus, Director of the SEC's Chicago Regional Office.
This isn't the first time Chandran has faced legal trouble. The U.S. Department of Justice previously arrested him on offenses related to wire fraud and processing illicit currency transactions as part of CoinDeal. As such, the SEC insists he should be the subject of a conduct-based injunction.
