In an interesting turn of events, the Department of Justice (DOJ) has brought criminal charges against Sam Lee and Brenda Chunga for their involvement in a 1.9 billion dollar cryptocurrency Ponzi fraud scheme called HyperFund. Rodney Burton, a HyperFund promoter, also faces fraud charges. The Securities and Exchange Commission (SEC) has also taken action against two of the accused in a related civil case, as the alleged crypto pyramid scheme collapsed in 2022.
The accused falsely claimed that investors in HyperFund would receive significant returns from cryptocurrency mining operations, which, as it turned out, did not exist.
The fraud involved multiple levels of severe deception, according to acting Assistant Attorney General Nicole Argentieri of the DOJ’s Criminal Division. The U.S. Attorney for Maryland, Erek Barron, emphasized the enormity of the alleged fraud.
1.8 Billion Dollar Fraud: Something not that small
The three defendants facing criminal charges include Sam Lee, an Australian citizen residing in Dubai and accused of co-founding HyperFund, along with two promoters, Rodney Burton of Miami, and Brenda Chunga of Severna Park, Maryland.
Sam Lee faces a charge of conspiracy to commit securities fraud and wire fraud, while Burton is charged with conspiracy to operate an unlicensed money-transmitting business and operating such a business. Chunga, also known as Bitcoin Beautee, pleaded guilty to conspiracy to commit securities fraud and wire fraud.
Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division stated that the defendants are charged with defrauding investors of $1.89 billion. According to court documents, the defendants allegedly made false representations, claiming that investors would receive significant returns from cryptocurrency mining operations that, in reality, did not exist.
SEC joins DoJ in suing HyperFund Executives
In a related civil action, the SEC charged Lee and Chunga for their involvement in the fraudulent crypto asset pyramid scheme known as HyperFund. The scheme attracted over $1.7 billion from investors globally. The SEC’s complaint alleges that Lee and Chunga promoted HyperFund “membership” packages, guaranteeing high returns from crypto asset mining operations and associations with a Fortune 500 company. However, HyperFund was revealed to be a pyramid scheme with no genuine revenue source. The collapse of the scheme in 2022 left investors unable to withdraw their funds.
The DOJ’s criminal case claims that from June 2020 to November 2022, Lee and his co-conspirators sold investment contracts through HyperFund’s platform, promising daily returns of 0.5% to 1% through large-scale crypto mining. HyperFund began blocking investor withdrawals in July 2021, according to the allegations.
Both Lee and Chunga, charged by the SEC, face violations of anti-fraud and registration provisions of U.S. securities laws. The SEC seeks permanent injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains, prejudgement interest, and civil penalties. Chunga agreed to settle the charges, subject to court approval, involving permanent injunctions and payment of disgorgement and civil penalties.
The SEC’s investigation, conducted by the Crypto Assets & Cyber Unit (CACU), is ongoing and supervised by David Hirsch and Jorge Tenreiro of the CACU, along with Nicholas Grippo and Scott Thompson of the Philadelphia Regional Office.
Following the announcements from the Department of Justice (DoJ) and the Securities and Exchange Commission (SEC), numerous individuals have taken to the internet to share a variety of memes and trolls related to the charges brought against the executives of HyperFund.
CRYPTO BREAKING NEWS
Crypto Fraud Crackdown: SEC, DOJ Charge HyperFund Founders In $1.8 Billion Scheme. In a significant development, the Department of Justice (DOJ) recently announced criminal charges against two individuals. It secured a guilty ple… check us out @… pic.twitter.com/FIuHFf1JdS— InnovatekMobile (@Neome_com) January 30, 2024
Increasing risks in Crypto
The HyperFund case has caused many people to become extremely concerned about the risks associated with investing in cryptocurrency. Noncompliance within this space can lead to schemes that exploit the promise of easy money, without providing the necessary investor protection disclosures mandated by federal securities laws.
This lack of transparency puts investors at risk and highlights the need for greater regulation in the cryptocurrency market. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized how this case exemplifies the challenges posed by noncompliance in the crypto industry.
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