SEC Sues HyperFund Founders For $1.7 Billion Crypto Scam
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Sam Lee and Brenda Chunga, also known as Bitcoin Beautee, for their involvement in a cryptocurrency scam that allegedly defrauded investors of over $1.7 billion. The duo is accused of selling fraudulent “membership” plans and promising substantial returns, actions that are in violation of federal laws. The SEC has accused the founders of running an illegal pyramid scheme and falsely promising high returns. The DOJ has charged the founders with securities and wire fraud.
What is HyperFund?
HyperFund, also known as HyperTech Group, was a platform that claimed to have built a Decentralized Finance (DeFi) ecosystem for digital currency. The company was launched by Ryan Xu and was associated with other entities like HyperCapital and HyperVerse.
HyperFund operated by selling memberships that required a purchase of 300, 500, or 1000 HU, an internal token that holds no real value. Members were promised the ability to triple their money in 600 days. The company generated revenue from affiliates or members selling its services and products. Affiliates that recruited new users and placed them at the top of a uni-level team were awarded referral bonuses.
The UK Financial Conduct Authority (FCA) issued warnings about HyperFund being an unlicensed firm. There were also numerous negative reviews on Trust Pilot exposing the company as a scam, with most of the positive reviews appearing to be fake and likely posted by affiliates trying to sell memberships.
The Alleged Scam
Lee and Chunga are alleged to have misled investors with promises of significant profits from HyperFund’s cryptocurrency mining operations and their purported affiliation with a Fortune 500 company. However, authorities contend that no such mining infrastructure existed. The SEC, in a statement, said, “The only thing they were mining was their investors’ pocket”.
Chunga, also known as Bitcoin Beautee, has reached a settlement with the SEC in which she has pledged not to violate these laws in the future and agreed to pay fines. The amount of these fines will be determined by the court at a later date. It’s important to note that this agreement still requires court approval.
On the other hand, the SEC is proceeding with legal action against Lee, taking him to court for his role in the alleged scam.
Implications for Investors
This case serves as a stark reminder of the risks associated with investing in cryptocurrency and the importance of due diligence. Investors are urged to be cautious and to thoroughly research any investment opportunities, particularly those promising high returns.
The SEC’s action against the founders of HyperFund underscores the agency’s commitment to protecting investors and maintaining the integrity of the financial markets. It also highlights the ongoing regulatory scrutiny of the cryptocurrency sector.
As the legal proceedings unfold, investors who fell victim to the alleged scam will be looking to the courts for justice. The outcome of this case could have significant implications for the broader cryptocurrency industry, potentially leading to increased regulatory oversight and stricter enforcement of securities laws.
Angel Marinov is the Managing Editor at Coinlabz. With extensive knowledge of crypto payments and blockchain use cases, Angel is a trusted source of accurate and timely information