SEC Charges Two Promoters of HyperFund Crypto Scheme with Fraud
The Securities and Exchange Commission (SEC) has accused two promoters of HyperFund, a crypto asset pyramid scheme that raised over $1.7 billion from investors worldwide, of fraud and unregistered securities offering.
The SEC announced on Monday that it filed a complaint against Xue Lee, also known as Sam Lee, and Brenda Chunga, also known as Bitcoin Beautee, for their involvement in the HyperFund scheme. According to the SEC, Lee and Chunga marketed HyperFund “membership” packages that promised investors high returns from HyperFund’s purported crypto asset mining operations and associations with a Fortune 500 company. However, the SEC alleges that Lee and Chunga knew or were reckless in not knowing that HyperFund was a pyramid scheme and had no real source of revenue other than funds received from investors.
The SEC claims that Lee and Chunga used social media platforms, such as YouTube, Telegram, and Facebook, to solicit investors and recruit new members into the scheme. They also hosted live events and webinars to promote HyperFund and its benefits. The SEC alleges that Lee and Chunga received commissions and bonuses from HyperFund based on the amount of funds they raised and the number of people they recruited.
The SEC’s complaint, filed in federal district court in the District of Maryland, charges Lee and Chunga with violating the anti-fraud and registration provisions of the federal securities laws. The SEC seeks permanent injunctive relief, conduct-based injunctions preventing the defendants from participating in multi-level marketing or crypto asset offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. Chunga agreed to settle the charges, to be permanently enjoined from future violations of the charged provisions and certain other activity, and to pay disgorgement and civil penalties in amounts to be determined by the court at a future date. The settlement is subject to court approval. The charges against Lee will be litigated.
In a parallel action, the U.S. Attorney’s Office for the District of Maryland announced criminal charges against Lee and Chunga on Monday. Chunga pleaded guilty to conspiracy to commit securities fraud and wire fraud. Lee remains at large and is considered a fugitive.
The SEC’s investigation was conducted by Michael Baker, Michael Brennan, and John Roscigno of the SEC’s Cyber Unit and supervised by Kristina Littman, Chief of the Cyber Unit. The SEC’s litigation will be led by Patrick Costello and supervised by Jan Folena. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Maryland, the Federal Bureau of Investigation, and the Maryland Securities Division.
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