SEC sues HyperFund for crypto Ponzi scheme, allegedly raising nearly $2 billion and hiring actors to impersonate CEO

The latest press release from the U.S. Securities and Exchange Commission (SEC) indicates that criminal charges have been filed against the Ponzi scheme project HyperFund for alleged fraud and selling unregistered securities. The SEC alleges that the two founders raised nearly $2 billion from June 2020 to early 2022, even going as far as hiring actors to impersonate a new CEO and deliver speeches to investors.

HyperFund Ponzi Scheme Raises $1.9 Billion

The Securities and Exchange Commission (SEC) filed a complaint yesterday, March 29, against two individuals responsible for HyperFund, identified as Xue Lee under the alias Sam Lee and Brenda Chunga under the alias Bitcoin Beautee, accusing them of involvement in a pyramid scheme and Ponzi fraud.

Reportedly, the two individuals raised $1.89 billion within two years starting from June 2020 through various false capital, technology, or hedge fund companies such as HyperFund, HyperCapital, and HyperTech.

However, in 2022, the collapse of related companies under HyperFund left investors worldwide with substantial losses.

Membership-Based Investment Product with 0.5% Daily Returns

Prior reports indicated that HyperFund falsely claimed affiliations with the top 500 global companies and promoted a "membership-based" cryptocurrency mining investment product to investors, offering astounding returns of 0.5% daily and over 500% annually for a payment of $300.

One of the project leaders, Lee, even stated during an online conference held in December 2021 that the product had up to 2 million members globally at its peak.

Moreover, Lee claimed that their subscription-based product differed from conventional financial investment tools in the market, hence did not require registration with financial authorities.

However, the SEC stated:

The project was essentially a pyramid scheme where returns to old investors were paid from new investors' funds, lacking a clear and legitimate source of income.

CEO Turns Out to Be a Fabricated Persona

Coindesk revealed that HyperFund even hired a Thai actor to pose as the new CEO, delivering speeches at HyperFund events, although the actor was merely a television host.

Earlier reports also indicated that the newly appointed HyperFund CEO under the pseudonym Reece Lewis had a fabricated background, including a degree from a prestigious university, work experience at Goldman Sachs, and claims of founding a web development company sold to Adobe, all of which were fictitious.

In essence, Reece Lewis as an individual essentially does not exist.

On the other hand, Chunga, one of the defendants, used victims' funds to purchase American residences valued at $1.2 million and $1.1 million, a Dubai apartment, a BMW luxury car, and designer clothing.

Additionally, Lee, the founder of HyperTech, and his business partner Ryan Xu had previously established the now-defunct Bitcoin company Blockchain Global, which still owes creditors $58 million.

Previously, financial regulatory bodies in countries including the UK, New Zealand, Canada, Germany, and Hungary had issued warnings about HyperFund.

SEC Enforcement Director: "They're Not Mining, They're Mining Your Wallet"

In a statement, SEC Enforcement Director Gurbir Grewal expressed:

As alleged in our complaint, Lee and Chunga lured investors with the promise of profits from cryptocurrency mining, but what HyperFund actually mined was investors' wallets:

He further emphasized, "The Commission underscores once again that non-compliance in the cryptocurrency space enables illicit actors to exploit high-return enticements without adhering to the detailed investor risk disclosures required by federal securities laws."

US Financial Industry Regulatory Authority: 70% of Crypto Companies Engage in Violations, Product Descriptions Include Exaggerations and Misleading Content

In response, the SEC has filed a complaint with the federal court in Maryland, alleging that the two individuals violated anti-fraud and registration provisions of federal securities laws and seeking the return of all ill-gotten gains.

Chunga has pleaded guilty to securities and telecommunications fraud charges and agreed to pay restitution and civil penalties as determined by the court.