Both Sam Lee and Brenda Chunga were charged for their involvement. Chunga, aka Bitcoin Beautee, settled with the SEC over the fraud and unregistered offering charges.
The duo promoted HyperFund as a lucrative venture tied to profitable mining operations. However, the SEC contends that the enterprise was nothing more than a pyramid scheme devoid of genuine revenue sources, accusing Lee and Chunga of either being aware of the deceit or displaying reckless disregard for the truth. The scheme eventually collapsed in 2022, leading to substantial financial losses for the investors involved.
Gurbir S. Grewal, director of the SEC’s division of enforcement, commented :
“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.”
Parallel to the SEC’s civil charges, the U.S. Attorney’s Office for the District of Maryland initiated criminal proceedings against the duo. Chunga has responded to the allegations by conceding to a plea of guilty on counts of conspiracy to commit securities fraud and wire fraud. Chunga has consented to resolve the SEC’s charges and is set to reimburse funds and incur civil penalties, the exact sums of which will be determined by the court.
HyperFund is identified as a minor entity within a network of dubious enterprises, which also include HyperCapital, HyperVerse, and HyperTech.
Recently, the U.S. authorities mandated the arrest and formal indictment of Rodney Burton for misappropriating upwards of $7 million via a deceitful investment scheme associated with HyperVerse.
The founders of HyperTech, including Lee and Ryan Xu, are recognized for founding Bitcoin Blockchain Global in Australia, a company currently grappling with a substantial debt load estimated at $58 million.
The SEC’s Office of Investor Education and Advocacy issued an investor alert in 2013 that highlights common red flags that investors should watch out for when investing.
“We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions.”
This early iteration of the SEC’s warnings about cryptocurrencies provides an early insight into the concerns around cryptocurrencies and the potential for bad actors to manipulate investors. Since then, cryptocurrency-related scams and Ponzi schemes have become considerably more complex.
Regulators are being forced to react to increasingly sophisticated scams, and with a lack of coherent regulation in place, the legal outcomes of crypto-related court cases will set precedents for the development of future regulation.