Crypto firm BKCoin hit by emergency asset freeze over alleged $100 million Ponzi scheme that paid for co-founder's rent and vacations

• The SEC Monday took emergency action against crypto firm BKCoin and its co-founder for allegedly running a fraud scheme.
• The company allegedly ran a $100 million Ponzi scheme that paid for its co-founder's rent and vacations.

A Miami-based crypto firm was hit by an emergency asset freeze for allegedly running a $100 million Ponzi scheme that paid for the co-founder's life of luxury.

On Monday, the Securities and Exchange Commission took action against BKCoin and its co-founder Kevin Kang for raising millions of dollars and using some of it "to make Ponzi-like payments."

BKCoin and Kang assured investors their money would be used to trade crypto, and that the company would generate returns for investors through separately managed accounts. However, BKCoin and Kang completely misused the funds, according to the regulator.

"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 SEC said.

Kang was also accused of spending at least $371,000 of investor money to pay for vacations, sporting events, and a New York City apartment. He tried to hide evidence by creating false documents with "inflated bank account balances," according to the SEC.

"This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena," said Eric Bustillo, director of the SEC's Miami office.

The crypto sector has come under intense scrutiny by US regulators following the collapse of FTX, which shook the entire industry to its core. Authorities have targeted firms including Gemini, Genesis, Kraken and Paxos for allegedly selling "unregistered securities."

Meanwhile, the world's largest cryptocurrency exchange Binance is under heavy pressure amid the crackdown. The Department of Justice is probing the firm for potentially breaching anti-money-laundering rules while the Commodity Futures Trading Commission is looking into whether it properly registered some crypto derivatives trading.