The U.S. Securities and Exchange Commission is not wavering in its crypto regulation war as another week brings another enforcement action.
On March 6, the SEC announced its latest emergency action against Miami-based investment adviser 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 through September 2022.
It stated that the firm raised the 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.
Misappropriating Funds
According to the complaint, the firm would generate profits for investors with crypto investments and five private funds.
However, the defendants disregarded the structure of the funds. They also “commingled investor assets and used more than $3.6 million to make Ponzi-like payments to fund investors,” it added.
Kang also misappropriated at least $371,000 of investor money to pay for vacations, sporting events tickets, and a New York City apartment.
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 stated.
Director of the SEC’s Miami Regional Office, Eric Bustillo, said:
“This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”
The regulator is now seeking permanent injunctions against BKCoin and Kang. It will also levy a civil penalty against both of the defendants. It also seeks disgorgement from each of the funds and Bison Digital LLC, “an entity that allegedly received approximately $12 million from BKCoin.”
Crypto Regulation War Intensifies
The SEC has ramped up its war on crypto in the wake of the FTX collapse in November. In January, the agency brought enforcement actions against Genesis and Gemini, and it followed up with a $30 million fine for Kraken in February.
Other firms currently in SEC scopes include Coinbase, Binance, and Paxos, with liquid staking platform Lido and stablecoin issuer Circle possibly on its target list.
SEC chair Gary Gensler has publicly stated several times that he believes all crypto assets aside from BTC are securities. However, U.S. 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 regulating by enforcement instead of fostering fintech innovation. However, cracking down on industry fraudsters gets no objections.
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