DOJ Announces Charges in $1.9 Billion HyperFund Cryptocurrency Ponzi Scheme
The Department of Justice (DOJ) has unveiled criminal charges against two individuals, and a third has pled guilty in connection with a sprawling $1.9 billion cryptocurrency Ponzi scheme named HyperFund. The Securities and Exchange Commission (SEC) has also filed related civil charges against two of the accused, shedding light on an alleged crypto pyramid scheme that crumbled in 2022.
Acting Assistant Attorney General Nicole Argentieri of the DOJ’s Criminal Division expressed concern over the extensive fraudulent activities, stating, “The level of alleged fraud here is staggering.”
The three defendants facing criminal charges are Sam Lee, an Australian residing in Dubai, along with HyperFund promoters Rodney Burton of Miami and Brenda Chunga of Severna Park, Maryland.
Lee, also known as Xue Lee, is accused of co-founding HyperFund and is charged with conspiracy to commit securities fraud and wire fraud. Burton, aka “Bitcoin Rodney,” faces charges related to operating an unlicensed money-transmitting business. Both could face a maximum of five years in prison if convicted.
Chunga, also known as “Bitcoin Beautee,” pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud, carrying the same potential maximum sentence. Additionally, she settled civil charges with the SEC for violating anti-fraud and registration provisions, agreeing to disgorge funds and pay civil fines determined at a later date.
The SEC complaint reveals that Chunga received over $3.7 million from HyperFund, using her earnings to fund extravagant personal expenses and recruit new investors by showcasing potential wealth through HyperFund.
The DOJ alleges that between June 2020 and November 2022, Lee and co-conspirators sold investment contracts online, promising returns of 0.5% to 1% daily through revenue from large-scale crypto mining. HyperFund began blocking withdrawals in July 2021, according to the DOJ.
The SEC’s complaint against Lee and Chunga, filed in the District of Maryland, accuses them of violating anti-fraud and registration provisions. It seeks permanent injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. Chunga’s settlement awaits court approval, while charges against Lee will proceed to litigation.
This case underscores the challenges in the crypto space, with Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasizing how noncompliance facilitates schemes that exploit investors.
Information for this briefing was found via CNBC and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.