The U.S. Department of Justice (DOJ) recently made a shocking announcement, revealing the emergence of criminal charges against two individuals and the guilty plea of a third person for orchestrating a massive $1.9 billion cryptocurrency Ponzi fraud scheme known as HyperFund. The Securities and Exchange Commission (SEC) also filed related civil action charges against two individuals involved in this alleged cryptocurrency pyramid scheme, which collapsed in 2022.
Criminal Charges and Pleas
The three defendants charged by the DOJ falsely claimed that investors in HyperFund would receive substantial returns paid from cryptocurrency mining operations, which, in reality, did not exist. Acting Assistant Attorney General Nicole Argentieri of the DOJ’s Criminal Division highlighted the enormity of the alleged fraud, labeling it as “staggering.” The individuals charged in the criminal case include Sam Lee, an Australian citizen living in Dubai, along with two HyperFund promoters, Rodney Burton of Miami and Brenda Chunga of Severna Park, Maryland. Lee, also known as Xue Lee, is charged with conspiracy to commit securities fraud and wire fraud, while Burton faces charges related to operating an unlicensed money-transmitting business. Chunga, also recognized as Bitcoin Beautee, pleaded guilty to conspiracy to commit securities fraud and wire fraud.
Both Lee and Burton face a maximum possible sentence of five years in prison if convicted. Chunga, through her guilty plea, agreed to settle civil charges by the SEC for violating the anti-fraud and registration provisions of U.S. securities laws. As part of this settlement, she will disgorge the money made in the scheme and face civil fines to be determined later.
The SEC Complaint
The SEC complaint articulated that Chunga, also known as Bitcoin Beautee, received over $3.7 million from both the HyperFund platform and investors, utilizing these earnings
to fund personal expenses and recruit others into the scheme by showcasing the potential wealth to be gained through HyperFund. Lee was also charged by the SEC with the same violations, further illuminating the depth of involvement in this fraudulent cryptocurrency operation.
Multiple Aliases and Scheme Operations
HyperFund, renowned by various names such as HyperTech, HyperCapital, HyperVerse, and HyperNation, was alleged to have sold investment contracts online, promising investors returns of between 0.5% and 1% daily, with the possibility of doubling or tripling their original investment through revenue from large-scale crypto mining. However, the scheme unraveled as HyperFund ceased investor withdrawals in July 2021, underscoring the cunning deception and manipulative nature of this fraudulent operation.
The scope and impact of this elaborate cryptocurrency fraud have stunned the regulatory authorities, ultimately leading to criminal charges, guilty pleas, and civil settlements against the individuals involved. The intricate web of deceit spun by the orchestrators of HyperFund has not only caused substantial financial losses but has also shattered investor trust and confidence in the cryptocurrency sector.
The revelation of this $1.9 billion cryptocurrency fraud emphasizes the critical need for heightened scrutiny and regulation within the digital asset space, as well as the imperative for investor awareness and caution when engaging in cryptocurrency investments. The collaborative efforts of the DOJ and SEC serve as a pivotal step towards combating fraudulent activities and safeguarding the integrity of the financial markets.
In conclusion, the exposure of the $1.9 billion cryptocurrency fraud perpetrated through HyperFund stands as a stark reminder of the ever-present risks and vulnerabilities within the cryptocurrency landscape. The enforcement actions taken by the DOJ and SEC underscore the unwavering commitment to holding perpetrators of financial fraud accountable and advocating for investor protection. It is crucial for individuals and regulatory entities to remain vigilant, proactive, and informed in order to mitigate the prevalence of cryptocurrency scams and illicit schemes, thereby fostering a more secure and transparent digital asset environment for all stakeholders.