DOJ and SEC Uncover $1.8 Billion Crypto Pyramid Scheme
The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have made significant progress in exposing a global crypto Ponzi fraud scheme called HyperFund. The DOJ has announced criminal charges against two individuals and secured a guilty plea from a third person involved in the scheme. The SEC has also filed a related civil action, charging two individuals for their roles in the alleged crypto pyramid scheme.
Fraudulent Claims and Allegations
The defendants in the HyperFund case falsely promised investors substantial returns from cryptocurrency mining operations that did not exist, according to Acting Assistant Attorney General Nicole Argentieri of the DOJ’s Criminal Division. US Attorney for Maryland Erek Barron described the level of fraud as staggering.
The SEC complaint alleges that Xue Lee (Sam Lee) and Brenda Chunga (Bitcoin Beautee) promoted HyperFund “membership” packages, promising high returns from crypto asset mining operations and partnerships with a Fortune 500 company. However, the SEC claims that HyperFund was a pyramid scheme without any real revenue source other than investors’ funds.
Consequences and Charges
After the collapse of the scheme in 2022, investors were unable to make withdrawals. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized how noncompliance in the crypto space enables schemes where promoters exploit the promise of easy money without providing necessary investor protections.
The SEC’s complaint accuses Lee and Chunga of violating anti-fraud and registration provisions of federal securities laws. The complaint seeks various forms of relief, including permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. Chunga has agreed to settle the charges, while Lee will face prosecution.
Criminal Charges and Guilty Plea
In addition to the SEC’s action, the US Attorney’s Office for the District of Maryland has filed criminal charges against Lee and Chunga. Chunga has pleaded guilty to conspiracy to commit securities fraud and wire fraud.
Hot Take: Exposing Crypto Fraud Schemes
The recent actions taken by the DOJ and SEC highlight their commitment to uncovering and prosecuting fraudulent crypto schemes. It serves as a reminder that noncompliance in the crypto space can lead to significant financial losses for investors. As the popularity of cryptocurrencies continues to rise, regulators are working diligently to protect individuals from scams and fraudulent activities. Investors should exercise caution and thoroughly research any investment opportunity before committing their funds.
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