By Liz Carey| January 31, 2024 | Digital Currency
On Monday, the Securities and Exchange Commission (SEC) announced charges against the founder and a promoter of HyperFund for their part in what the agency termed a $1.7 billion “crypto asset pyramid scheme.
© Shutterstock
According to the SEC, Xue Lee (aka Sam Lee) and Brenda Chunga (aka Bitcoin Beautee) promoted HyperFund “membership” packages, which Lee and Chunga claimed guaranteed investors high returns, including from HyperFund’s crypto asset mining operations and associations with a Fortune 500 company. However, the agency said, the two knew or were reckless in not knowing, that HyperFund was a pyramid scheme and had no real source of revenue outside of investor money. According to the SEC, the scheme raised more than $1.7 billion from investors around the world.
“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,” Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said. “This case illustrates yet again how noncompliance in the crypto space facilitates schemes where promoters capitalize on the promise of easy money, without providing the detailed investor protection disclosures required by the registration provisions of the federal securities laws.”
The SEC said in 2022 the scheme collapsed and investors were no longer able to make withdrawals. The complaint against Lee and Chunga charges the two with violating anti-fraud and registration provisions of the federal securities law, and seeks a permanent injunction barring the two from participating in multi-level marketing or crypto asset offerings, as well as disgorgement of ill-gotten gains, pre-judgement interest and civil penalties.
Officials said Chunga agreed to settle the charges, and to pay civil penalties, as well as be permanently barred from future activities. That settlement is pending court approval. Chunga also pled guilty to charges brought by the U.S. Attorney’s Office for the District of Maryland for conspiracy to commit securities fraud and wire fraud.
Charges against Lee are pending litigation, the SEC said. Lee also faces conspiracy to commit securities fraud and wire fraud charges from the U.S. Attorney’s office.
