The U.S. Securities and Exchange Commission filed an emergency action to freeze and appoint a receiver for the assets of cryptocurrency-focused hedge fund BKCoin Management and co-founder Kevin Kang, according to a complaint unsealed Monday. The SEC's complaint accused Kang and his Miami-based fund of using a portion of the ~$100M it raised from at least 55 investors (from October 2018 through September 2022) to make "Ponzi-like payments and for personal use." BKCoin and Kang promised investors that their money would be used mostly to trade crypto through separately managed accounts, said the SEC, which was granted emergency relief by the United States District Court for the Southern District of Florida. Instead, BKCoin and Kang commingled investor funds and used over $3.6M to make payments to other investors. In addition, the SEC alleged that Kang misappropriated at least $371K in investor funds for his personal use. He "attempted to conceal the unauthorized use of investor money by providing altered documents with inflated bank account balances to the third-party administrator for certain of the funds." BKCoin apparently also misrepresented to some investors that one of its funds had been audited by a "top four auditor," when in fact it never received an audit, the SEC said. The complaint is seeking permanent injunctions against both BKCoin and Kang, in addition to disgorgement, prejudgement interest, and a civil penalty. The securities regulator's scrutiny of the crypto space has been heating up in the months following the collapse of crypto exchange FTX ( FTT-USD ). Last month, the SEC sued Terraform Labs and Do Kwon for allegedly running a multibillion-dollar crypto fraud scheme .
