SEC Initiates Legal Action Against HyperFund Founders for Alleged $1.9B Ponzi Crypto Scheme
US SEC charged founders of the $1.9 billion HyperFund ponzi crypto scheme, emphasizing risks in the cryptocurrency sector.
The United States Securities and Exchange Commission (SEC) initiated a civil action against Xue Lee, alias Sam Lee and Brenda Chunga alias “Bitcoin Beautee,” for their alleged involvement in orchestrating a global $1.9 billion cryptocurrency Ponzi fraud scheme named HyperFund.
Concurrently, the United States Department of Justice (DOJ) announced criminal charges against two individuals, with a third person entering a guilty plea. The alleged cryptocurrency pyramid scheme, which operated from 2020 until its collapse in 2022, purportedly attracted worldwide investors with promises of substantial returns.
The SEC asserts that the pair promoted HyperFund as an avenue for investors to engage in lucrative cryptocurrency asset mining activities, highlighting purported affiliations with a Fortune 500 company. However, according to the SEC’s complaint, Xue Lee and Brenda Chunga were either well aware or, at the very least, recklessly indifferent to the fact that HyperFund operated as a pyramid scheme. The scheme allegedly lacked any meaningful revenue source aside from the funds gathered from investors.
The SEC’s legal action aims for enduring injunctive relief, conduct-based injunctions, the return of unlawfully acquired gains, prejudgment interest, and civil penalties against Xue Lee and Brenda Chunga. It is noteworthy that Brenda Chunga has chosen to resolve the charges by entering into a settlement. As part of the resolution, she has pleaded guilty to conspiracy to commit securities fraud and wire fraud.
The terms of the settlement encompass a permanent injunction against future violations, alongside the obligation to disgorge ill-gotten gains and pay civil penalties—subject to court approval. If convicted, suspects face a maximum possible sentence of five years in prison.
The Sheer Importance of Crypto Compliance
Meanwhile, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, highlighted the importance of compliance within the cryptocurrency space. He emphasized that noncompliance fosters an environment where promoters can capitalize on the allure of rapid profits without adhering to the necessary investor protection disclosures mandated by federal securities laws.
Recently, United States authorities arrested and charged Rodney Burton, also known as ‘Bitcoin Rodney,’ for his alleged involvement in promoting the Hyperfund, who was accused of defrauding investors through a fake investment scheme.
A network of HyperFund promoters operating in the District of Maryland and beyond conducted fraudulent promotional presentations to existing and potential investors. Rodney Burton, among others, received 562 wire transfers or cashier’s checks from individuals totaling $7,851,711.
The case highlights the persistent challenges encountered by regulatory bodies in the cryptocurrency space and serves as a cautionary tale for investors navigating this high-risk environment. As investigations proceed, the SEC maintains a watchful stance, emphasizing the importance of investor education to identify and steer clear of fraudulent schemes.
In the aftermath of the HyperFund fraud, legal actions by the SEC and DOJ emphasize the necessity for vigilance, compliance, and investor education to mitigate risks in the evolving cryptocurrency sector.
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