A $1.7 billion cryptocurrency fraud scheme involving false promises of listing on the Hong Kong stock exchange and fabricated personas has been exposed in a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) on January 29.
The lawsuit names Xue Lee, also known as Sam Lee, and Brenda Chunga, who went by the moniker “Bitcoin Beautee,” as the alleged perpetrators behind the fraudulent operation.
They operated under various aliases, including HyperFund, HyperVerse, and HyperTech.
The SEC accuses Lee and Chunga of enticing investors with deceptive membership packages that guaranteed high returns from cryptocurrency mining activities.
The ill-gotten gains from these investments were allegedly used to acquire luxury cars, condos, and fund cryptocurrency wallets.
While Chunga has agreed to settle charges and pay civil penalties, she, along with Lee, faces charges from the U.S. Attorney’s Office for conspiracy to commit securities fraud and wire fraud.
Chunga has also pleaded guilty to these criminal charges, and a third individual, promoter Rodney Burton, has also been charged by prosecutors.
According to the SEC, Lee misled recruiters by claiming that HyperTech would be listed on the Hong Kong Stock Exchange by 2022.
The regulator also asserted that the duo shared fake screenshots of appearances on CNN and a fictitious Amazon Prime documentary, “Next: Blockchain,” to bolster their company’s reputation.
The fraudulent marketing efforts even included hiring a Thai actor to impersonate the CEO of HyperVerse, further exposing the extent of their deceit.
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The SEC alleges that Lee employed a pyramid scheme-like referral system to recruit new investors, enticing them with the promise of initial coin offerings at 20-30% below market value.
Chunga is accused of personally pocketing $3.7 million, which she used to buy a $1.2 million house in Maryland, a $1.1 million condo in Dubai, a BMW, and designer clothing.
Meanwhile, Lee allegedly transferred around $140,000 in cryptocurrencies to a wallet under his control.
This fraudulent operation, active from June 2020 to May 2022, highlights the persistence of fraud and noncompliance with U.S. securities laws in the cryptocurrency industry.
Gurbir Grewal, the director of the SEC’s Division of Enforcement, emphasized the scheme’s impact, stating, “As alleged in our complaint, Lee and Chunga attracted investors with the allure of profits from crypto asset mining, but the only thing that HyperFund mined was its investors’ pockets.”
The SEC is seeking permanent injunctive relief, conduct-based injunctions preventing the defendants from participating in multilevel marketing or cryptocurrency offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
Chunga resides in Maryland, while Lee, an Australian national, is believed to be currently residing in the United Arab Emirates.
Lee is also facing scrutiny from the Australian securities regulator due to the collapse of his previous cryptocurrency venture, Blockchain Global, in 2021, leaving creditors owed $58 million.
The Australian Securities Investment Commission is considering potential charges against Lee and his business partners, Allan Guo and Ryan Xu, for potential breaches of the Corporations Act.
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