The United States Securities and Exchange Commission (SEC) has taken legal action against individuals connected to an alleged cryptocurrency fraud scheme valued at $1.7 billion. The scheme, operating under various names such as HyperFund, HyperVerse, and HyperTech, is accused of making false assurances to investors, including plans to list on the Hong Kong stock exchange. Astonishingly, the operation even hired an actor to impersonate the company's CEO during its launch in 2021.
In a filing dated January 29, the SEC charged Xue Lee, also known as Sam Lee, and Brenda "Bitcoin Beautee" Chunga for their roles in the elaborate scheme. Both individuals promoted membership packages that offered guaranteed high returns from cryptocurrency mining, which the SEC alleges were deceptive. The ill-gotten gains from this fraudulent operation were purportedly used to acquire luxury vehicles, condominiums, and fund cryptocurrency wallets.
While Brenda Chunga has agreed to settle the charges and pay civil penalties, the specific amount will be determined by the court at a later date. Both Chunga and Xue Lee also face charges from the U.S. Attorney's Office for the District of Maryland for conspiracy to commit securities fraud and wire fraud. Chunga has already pleaded guilty to these criminal charges, and another individual, promoter Rodney Burton, has also been charged in connection with the scheme.
According to the SEC, Xue Lee claimed that HyperTech had plans to list on the Hong Kong Stock Exchange by 2022. The SEC also asserted that the duo used fake screenshots depicting appearances on CNN and an Amazon Prime documentary titled "Next: Blockchain" to bolster the company's credibility. Their deceptive marketing extended to hiring a Thai actor to impersonate the CEO during HyperVerse's launch, a ruse that deceived potential investors.
The SEC further alleges that Xue Lee employed a pyramid scheme-like referral system to incentivize existing members to recruit new investors. These recruitment efforts were complemented by misleading promises that new recruits could participate in initial coin offerings at prices 20–30% below market value.
Brenda Chunga is accused of personally profiting by $3.7 million, which she reportedly used to acquire a $1.2 million house in Maryland, a $1.1 million condominium in Dubai, a BMW, and designer clothing. Xue Lee allegedly received around $140,000 in cryptocurrencies deposited into a wallet under his control.
The fraudulent operation, which operated from June 2020 to May 2022, highlights the persistence of fraud and noncompliance with U.S. securities laws within the cryptocurrency industry. Gurbir Grewal, director of the SEC's Division of Enforcement, expressed the severity of the situation and stated, "The only thing that HyperFund mined was its investors' pockets."
The SEC's legal action seeks permanent injunctive relief, conduct-based injunctions to prevent the defendants from participating in multilevel marketing or cryptocurrency offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. While Brenda Chunga resides in Maryland, Xue Lee is an Australian national believed to be residing in the United Arab Emirates.
Xue Lee is also under investigation by the Australian securities regulator for his involvement in the collapsed cryptocurrency business, Blockchain Global, which owed $58 million to creditors when it failed in 2021. The Australian Securities Investment Commission is considering charges against Lee and his business partners, Allan Guo and Ryan Xu, for potential breaches of the Corporations Act.