A Miami company that told investors money would be used in the modern market of crypto-asset trading used investor money in that old Miami staple, the Ponzi scheme, according to a Securities and Exchange Commission’s complaint.
The Miami federal court filing unsealed Monday described a $100 million Ponzi scheme by BKCoin Management and one of its founders, New York-based Min Woo Kang, also known as Kevin Kang.
Kang, the SEC said, “misappropriated” investor money to pay for sports event tickets, “fine dining,” a Hamptons vacation home and a down payment on a New York apartment.
That apartment is now part of an asset freeze covering Kang; BKCoin Management, LLC; BKCoin Capital; BK Offshore Fund, Ltd.; BKCoin Multi-Strategy Master Fund, Ltd.; BKCoin Multi-Strategy Fund, LP; BKCoin Multi-Strategy Fund Ltd.; and Bison Digital LLC.
The asset freeze came down Feb. 24, a day after the SEC filed its complaint.
The court also appointed Michael I. Goldberg of the Akerman law firm as receiver for all the BK companies on the defendant side of the SEC’s complaint. The online docket doesn’t list attorneys for Kang or the BKCoin companies. Celia Cohen of Ballard Spahr is representing Kang in a suit filed in New York by Miami Lakes resident Alejandro Canto.
“The SEC typically recommends the appointment of a receiver in cases in which the SEC fears a company or an individual may dissipate or waste corporate property and assets,” the SEC explains. “A receiver is a neutral third-party custodian for the property who is granted certain powers by the court. A receiver’s powers generally include taking legal control of and protecting assets, filing claims on behalf of an entity placed into a “receivership,” and, ultimately, distributing assets to defrauded investors, claimants or creditors through a court-approved plan.”
As for those investors, the SEC complaint says 55 investors gave BKCoin Management and Kang $100 million. But $100 million in Miami sometimes doesn’t go where the person getting the money says it will.
HOW THE SEC SAYS BKCOIN USED INVESTOR COIN
Though the complaint says BKCoin’s main place of business is Miami and state of Florida records say its address is 1101 Brickell Ave. S Tower, No. 8, BKCoin wasn’t registered to do business in Florida until Dec. 13, 2021. Like many companies, BKCoin’s registered legal home is Delaware. Kang founded the company with Carlos Betancourt, who isn’t named in the SEC complaint, but is named in Canto’s lawsuit.
The SEC complaint says BKCoin and Kang told investors that their money would be used for crypto asset trading. Also, they claimed BKCoin or one of the BKCoin multi-strategy funds “is one of the only firms with a U.S. opinion from a top four auditor.”
One investor, the complaint says, put $1.3 million in a multi-strategy fund account just over a month after receiving an email with that claim on May 24, 2022.
“The Big Four” auditors are Ernst & Young, KPMG, PriceWaterhouseCoopers, and Deloitte Touche. An auditor’s opinion is based on the procedures used to produce financial records or statements.
An opinion is also something the SEC says BKCoin never received from the Big Four or any other auditor of any size. The complaint accuses Kang of giving false account balances to a third-party administrator for use in performance reports delivered to investors.
As for using the money for crypto assets, BKCoin and Kang “disregarded the BKCoin Funds’ structures, commingled investor assets among the BKCoin Funds and misappropriated investors’ funds for unauthorized purposes,” the SEC said.
After BKCoin and Kang “looted substantially all investor deposits for the multi-strategy funds, transferring millions to BKCoins and the Offshore Fund’s bank accounts,” the complaint says they “used at least $3.6 million to make Ponzi-like payments to fund investors.”
The complaint also notes that Bison Digital, a crypto fund with no investors aside from Kang and Betancourt, “received $l2 million from BKCoin and the BKCoin Funds for no apparent or legitimate reason.”
Of the $371,000 the complaint credits to Kang’s “misappropriation,” it says $35,000 was wired from a BKCoin account to rent a vacation house in Montauk, New York; $83,000 went to a credit card on which Kang put Caribbean travel, sports tickets and “fine dining”; and $242,000 was used as the down payment on a $2.4 million New York City apartment.
The SEC complaint says BKCoin suspended Kang in October.
CANTO, CARLOS AND KANG’S CRYPTO COMPANY
On Oct. 18, Miami Lakes resident Alejandro Canto filed suit in New York federal court against BKCoin, Betancourt and Kang. The online court docket says on Feb. 17, a default was entered against Betancourt when he didn’t answer the Jan. 20 amended lawsuit.
That lawsuit says Canto hired BKCoin to manage his crypto investment portfolio and BKCoin “heralded themselves as prodigies” when Canto’s portfolio grew to more than $11 million from a few hundred thousand dollars.
“But when the crypto markets began to see downturns, BKCoin ceased regularly updating Canto about his investment portfolio,” the lawsuit said. “Then, BKCoin, at the direction of its principals, began raiding Canto’s multi-million-dollar portfolio, purportedly for margin calls related to certain loans Canto executed with BKCoin. But Canto never authorized such margin calls, and neither BKCoin nor its principals had the authority to do so under the relevant loan agreements.”