SEC files a lawsuit against crypto Ponzi scheme HyperFund for a $1,7 billion fraud scheme

What’s new? The US Securities and Exchange Commission (SEC) has accused crypto project HyperFund of defrauding investors of $1,7 billion. Founders Xue Lee and Brenda Chunga, also known as Sam Lee and Bitcoin Beautee, offered investors various membership packages with the false promise of guaranteed high returns from cryptocurrency mining operations. They used the funds raised to buy luxury cars and apartments and to fund personal crypto wallets, the regulator’s lawsuit says.

SEC statement

What else is known? The project operated under several names, such as HyperFund, HyperVerse, and HyperTech, from 2020 to 2022. According to the SEC, Lee told investors that the company plans to go public on the Hong Kong Stock Exchange by 2022. The founders provided fake screenshots of their media appearances to boost the firm’s reputation, which were featured on CNN and in a documentary called Next: Blockchain and hired an actor to play the role of CEO.

Lee implemented a referral system to reward existing members for bringing in new investors. He promised that new investors could participate in initial coin offerings (ICOs) at 20-30% below market price.

The SEC noted that Chunga agreed to settle the charges and pay civil penalties in an amount to be determined by the court at a later date. The founders of HyperFund also face charges from the US Attorney’s Office for the District of Maryland for conspiracy to commit securities fraud. Chunga pleaded guilty to those criminal charges as well. Prosecutors also filed charges against a third person, promoter Rodney Burton.

The SEC accuses Chunga of embezzling $3,7 million, which was spent on a $1,2 million home in Maryland, a $1,1 million condo in Dubai, a BMW, and designer clothes. Lee withdrew about $140 000 in cryptocurrencies to a wallet under his control.

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The SEC filed 46 lawsuits against crypto companies in 2023, a record for the regulator. Most of the lawsuits involve an unregistered offering of securities and/or fraud in its offering.