The United States Securities and Exchange Commission (SEC) has filed a lawsuit against two individuals, Xue Lee (aka Sam Lee) and Brenda “Bitcoin Beautee” Chunga, for their alleged involvement in a massive cryptocurrency fraud scheme. This scheme, which operated under various names including HyperFund, HyperVerse, and HyperTech, is accused of defrauding investors of $1.7 billion.
The lawsuit, filed on January 29, alleges that Lee and Chunga lured investors with promises of high returns from cryptocurrency mining operations. They reportedly used the proceeds to purchase luxury items such as cars, condos, and to fund cryptocurrency wallets. Chunga has agreed to settle the charges and will face civil penalties, while both Lee and Chunga are also facing criminal charges for conspiracy to commit securities fraud and wire fraud by the U.S. Attorney’s Office for the District of Maryland. Chunga has pleaded guilty to these criminal charges.
The SEC’s investigation revealed that Lee falsely claimed plans to list HyperTech on the Hong Kong Stock Exchange by 2022 and used fabricated media appearances and a documentary to enhance the firm’s credibility. In a bizarre twist, the firm even hired a Thai actor to impersonate the CEO of HyperVerse.
The SEC accuses Lee of implementing a pyramid scheme-like referral system and making false promises about initial coin offerings. Chunga allegedly personally gained $3.7 million, spending it on real estate, a luxury car, and designer clothing. Lee is accused of transferring around $140,000 in cryptocurrencies to his own wallet.
This case highlights ongoing issues of fraud and noncompliance within the cryptocurrency industry. Gurbir Grewal, the director of the SEC’s Division of Enforcement, emphasized the deceptive nature of the scheme, stating that HyperFund mined its investors’ pockets rather than providing legitimate crypto asset mining.
The SEC is seeking 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 Chunga is based in Maryland, Lee, an Australian national, is believed to be residing in the United Arab Emirates. Lee is also under investigation by the Australian Securities Investment Commission following the collapse of another of his cryptocurrency businesses, Blockchain Global, in 2021.
The Australian Securities Investment Commission is considering charges against Lee and his business partners, Allan Guo and Ryan Xu, for possible violations of the Corporations Act. This follows the collapse of Blockchain Global, which left $58 million owed to creditors.
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