The US Securities and Exchange Commission (SEC) has charged two masterminds behind the $1.9 billion crypto fraud investment scheme HyperFund.
The regulator has indicted Australian blockchain entrepreneur Sam Lee and HyperFund promoter Brenda Chunga for their involvement in the Ponzi scheme.
HyperFund, launched in June 2020, claimed to be a project dedicated to creating a DeFi ecosystem for crypto market participants.
Multi-level Marketing Ponzi Scheme
From June 2020 through May 2022, HyperFund offered membership packages promising exorbitant passive returns, derived from HyperFund’s crypto mining operations.
However, the Fund had no real source of revenue other than funds received from investors and didn’t engage in any large-scale crypto mining, despite the claims.
It also implemented a pyramid scheme-like referral system to reward existing members for recruiting new investors, the lawsuit noted.
With no apparent legitimate source of revenues, investor withdrawals were paid with new investor deposits, the regulator added.
“As alleged in our complaint, Lee and Chunga attracted investors with the allure of profits from crypto asset mining. But the only thing that HyperFund mined was its investors’ pockets,” says Gurbir Grewal, SEC’s enforcement division head.
Criminal Allegations
Further, the a grand jury for the District of Maryland charged criminal indictments against the two leaders over committing securities and wire fraud.
Additionally, the Department of Justice on Monday, accused a third individual – Rodney Burton – for involving in HyperFund fake promotions.
Early this month, Burton was apprehended in Florida for his role in an elaborate crypt investing scheme.
Nicole M. Argentieri of the department’s criminal division stressed on the efforts taken by authorities to uncover sophisticated crypto frauds.
“As alleged in court documents, the defendants falsely represented that investors would receive substantial returns paid from cryptocurrency mining operations, which did not in fact exist.”
If convicted, Lee and Burton would face a maximum penalty of five years in prison. Chunga, however, pled guilty on Monday to one count of conspiracy to commit securities and wire fraud. She will serve a maximum of five years term in jail.
HyperFund crypto pyramid scheme carried various online investment businesses under brands including HyperVerse, HyperCapital and HyperTech.
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