SEC accuses crypto hedge fund of fraud

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The US Securities and Exchange Commission (SEC) has accused crypto hedge fund BKCoin Management and one of the firm's co-founders, Min Woo “Kevin” Kang, of fraud and misusing investor funds and has successfully filed an emergency action to freeze assets and appoint a receiver for the business. 

The SEC alleges that from at least October 2018 to September 2022, BKCoin raised approximately $100 million from at least 55 investors to invest in crypto assets, but BKCoin and Kang instead used some of the money to make Ponzi-like payments and for personal use.

According to the SEC’s complaint, BKCoin and Kang assured investors that their money would be used primarily to trade crypto assets and represented that BKCoin would generate returns for investors through separately managed accounts and five private funds. 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. 

The complaint also alleges that Kang misappropriated at least $371,000 of investor money to, among other things, pay for vacations, sporting events tickets, and a New York City apartment. According to the complaint, Kang attempted to conceal the unauthorised use of investor money by providing altered documents with inflated bank account balances to the third-party administrator for certain of the funds. The complaint further alleges that BKCoin materially misrepresented to some investors that BKCoin, or one of the funds, received an audit opinion from a “top four auditor,” when in fact neither BKCoin nor any of the funds received an audit opinion at any time.

The SEC’s complaint, filed in the United States District Court for the Southern District of Florida, alleges that BKCoin and Kang violated the antifraud provisions of the federal securities laws. The SEC investigation is ongoing.

Kang was “suspended” from employment by BKCoin in October, according to the SEC.
 

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