Xue Lee and Brenda Chunga have both been charged by the US Securities and Exchange Commission (SEC) for their involvement in the fraudulent HyperFund pyramid scheme.
Lee (also known as Sam Lee) and Chunga (also known as Bitcoin Beautee) are charged with helping to raise more than $1.7bn from investors by claiming to guarantee high returns when investing in crypto asset mining operations.
This promotion of ‘membership packages’ stem from a complaint filed by the SEC from June 2020 to early 2022, alleging 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”.
In 2022, the HyperFund scheme collapsed and investors were no longer able to make withdrawals.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated: “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.
“This case illustrates yet again how noncompliance in the crypto space facilitates schemes where promoters capitalise on the promise of easy money, without providing the detailed investor protection disclosures required by the registration provisions of the federal securities laws.”
The SEC’s complaint, filed in a federal district court in the District of Maryland, charged Lee and Chunga with violating the anti-fraud and registration provisions of the federal securities laws.
The complaint 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.
In a parallel action, the U.S. Attorney’s Office for the District of Maryland today announced criminal charges against Lee and Chunga. Chunga pleaded guilty to conspiracy to commit securities fraud and wire fraud.