The United States Securities and Exchange Commission has targeted an investment adviser and an individual allegedly connected to a $100 million cryptocurrency fraud in its latest enforcement action.
According to a March 6 announcement, The SEC filed an emergency action on February 23 against investment adviser BKCoin and one of its directors, Kevin Kang, alleging that both “disregarded the structure of the funds, mixed investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors”. The financial regulator’s complaint alleged that BKCoin raised approximately $100 million from investors to invest in cryptocurrency, but Kang diverted some of the funds for personal use — including vacations, sporting event tickets, and an apartment.
“As we allege, the investors entrusted their money to the defendants to trade crypto assets”said Eric Bustillo, director of the SEC’s Miami Regional Office. “Instead, the defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct. This action underscores our continued commitment to protecting investors and rooting out fraud in all securities sectors, including the field of crypto assets”.
The SEC complaint was the latest enforcement action directed at a company or individuals involved in cryptocurrency, alleging violations of the anti-fraud provisions of federal securities laws.. According to the regulator, the SEC intended to seek remand, prejudgment interest, and a civil penalty against BKCoin and Kang, as well as a permanent injunction against both parties.
Many in the industry have criticized Chairman Gary Gensler, who is leading the SEC as the agency moves forward with a series of anti-cryptocurrency actions, for labeling some crypto assets as securities through enforcement rather than the court system. The Wall Street Journal reported on March 5 that cryptocurrency exchange Binance attempted to hire Gensler as an adviser in 2018 and 2019 prior to his appointment as SEC chairman.
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