Authorities in the United States have busted a cryptocurrency Ponzi scheme called HyperFund, which raised up to $1.89 billion from investors and brought civil and criminal charges against its founder Xue Lee (Sam Lee). The civil charges were brought by the Securities and Exchange Commission (SEC) and the criminal charges were brought by federal prosecutors.
A massive cryptocurrency ponzi scheme
The civil complaint also named Brenda Chunga (Bitcoin Beautee), one of the biggest supporters of the pyramid scheme, while Chunga and another supporter, Rodney Burton, were named in the criminal complaint. Chunga had pleaded guilty to both civil and criminal charges. According to court documents, Hyperfund operated between June 2020 and early 2022, selling “membership” packages to investors. It claimed that “investors are guaranteed high returns” from its so-called crypto asset mining operations and partnerships with a Fortune 500 company.
But in reality, the fund had no real source of income. It operated as a pyramid scheme, paying old investors from revenues collected from new investors. The fraud operation collapsed in 2022 and investors’ withdrawals were halted. The SEC estimated the size of the fraud fund at $1.7 billion, while federal prosecutors estimated the figure at $1.89 billion. “As alleged in our complaint, Lee and Chunga lured investors with the lure of profits from mining crypto assets, but the only thing HyperFund took out was investors’ pockets,” said SEC Enforcement Division Director Gurbir Grewal.
Fines have not yet been determined
The US Department of Justice (DoJ) also stated that it will punish cryptocurrency fraud. The SEC charged Lee and Chunga with violating anti-fraud and registration provisions and is seeking to recover investors’ proceeds along with yet-to-be-determined fines. Federal prosecutors, meanwhile, have charged Lee and Chunga with conspiracy to commit securities and wire fraud. Burton faces one count of conspiracy to operate an unlicensed money transfer business and one count of operating an unlicensed money transfer business. Each count of these criminal charges carries a maximum penalty of five years.
Although Chunga pleaded guilty, his prison sentence has not yet been determined due to the fine and criminal charges in the civil case. “The level of fraud allegations here is staggering,” said Erek Barron, U.S. Attorney for the District of Maryland. “Whether it’s a cryptocurrency scam or another financial scam, if it sounds too good to be true, it probably is. “This office and our law enforcement partners will hold perpetrators accountable for this and other fraudulent schemes.” said.
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