In a recent revelation, the United States Securities and Exchange Commission has raised allegations about another crypto firm. On Monday, the regulator announced emergency action against investment adviser BKCoin Management in connection with an alleged fraud scheme.
The regulator alleged that Miami-based BKCoin Management raised $100 million from at least 55 investors to plug into cryptocurrency but instead used it to splash on luxury items and make “Ponzi-like payments.”
Additionally, the SEC alleged that Kevin Kang, one of BKCoin Management’s prime personalities, misappropriated at least $371,000 of investor money to pay for a holiday and an apartment, and falsified documents. Eric I. Bustillo, Director of the SEC’s Miami Regional Office, said that the “defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct.”
In its announcement, the regulator quoted:
As the complaint alleges, the defendants disregarded the structure of the funds, commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors.
In response to the case, the SEC revealed that it has already frozen assets and obtained other emergency relief against the company. The regulator now seeks permanent injunctions against BKCoin and Kang, disgorgement, prejudgment interest, and a civil penalty from both of the defendants. It also seeks an officer and director bar and conduct-based injunction against Kang.
The SEC has for years maintained a tough stance against the crypto industry. Since 2018, it has repeatedly targeted token sales and ICOs, a form of capital fundraising in crypto, as unregistered securities sales.
Under the presidency of Gary Gensler, the chair of the SEC, the regulator has intensified the crackdown. Gensler has made it known that he believes that essentially every coin and token other than Bitcoin is an unregistered security. Gensler’s opinion and regulatory approach have been highly criticized by crypto advocates.
A few days back, Hester Peirce, Commissioner of the SEC, pointed out that Congress was “actively considering the issue” adding that the SEC and other financial regulators could hold public roundtables pending results from the legislators. She also said that the regulators can’t draft rules using enforcement actions.
As per a report from a consulting firm Cornerstone Research, the United States Securities and Exchange Commission (SEC) brought a record number of crypto-related enforcement actions last year. Figures from 2022 have been about 50% up from 2021. The report stated that the most common allegations amongst these actions were fraud and unregistered securities.
While the SEC has always been very strict towards cryptocurrencies, in the past weeks it has been severely cracking down on crypto companies. Within a month, it brought under its radar several names like Kraken, Paxos, Silveragete, etc.
On February 13, the SEC issued a Wells Notice to Paxos, the issuer of the third largest stablecoin BUSD. The regulator accused the firm of selling unregistered securities. To this, the firm publicly acknowledged the notice but categorically disagreed with the regulator and said that the BUSD is not a security under federal laws. However, the firm later confirmed that it is having talks with the regulator.
Before this, the SEC targeted the Kraken crypto exchange and accused the company of selling unregistered securities through its staking-as-a-service product. As a result, Kraken was hit with a $30 million fine and ordered to shut down its staking services.