Finance

HyperVerse’s alleged $1.7B ‘Ponzi’ promised HK listing, hired fake CEO

At least two people were behind an alleged $1.7 billion cryptocurrency fraud scheme that once promised investors plans to list on the Hong Kong stock exchange and even hired an actor to play as the firm’s CEO, according to a lawsuit from the United States securities regulator.

In a Jan. 29 filing by the U.S. Securities and Exchange Commission (SEC), the agency charged Xue Lee (aka Sam Lee) and Brenda “Bitcoin Beautee” Chunga for their involvement in the scheme, which operated under several names, such as HyperFund, HyperVerse and HyperTech.

The two were said to have promoted various membership packages to investors with the false promise of guaranteed, high returns from cryptocurrency mining operations and allegedly used the “ill-gotten gains” to buy luxury cars and condos and fund crypto wallets.

While the SEC noted that Chunga has already agreed to settle the charges and pay civil penalties in an amount to be determined by a court at a later date, she — along with Lee — is also facing charges from the U.S. Attorney’s Office for the District of Maryland for conspiracy to commit securities fraud and wire fraud. Chunga also pleaded guilty to those criminal charges.

A third person, promoter Rodney Burton, has also been charged by prosecutors.

According to the SEC, Lee once told recruiters that HyperTech planned to list on the Hong Kong Stock Exchange by 2022. The securities regulator also alleged the pair shared fake screenshots of several media appearances on CNN and an Amazon Prime documentary called Next: Blockchain to boost the firm’s reputation.

The firm’s marketing efforts even went as far as hiring a Thai actor to promote the launch of HyperVerse, with the fake actor portraying its CEO, the SEC claims.

“In reality, the person presented as [Steven Reece] Lewis was an actor playing a role of a fabricated character. He was not the CEO of HyperVerse.”

The SEC claims Lee lured in more recruits by implementing a pyramid scheme-like referral system to reward existing members for recruiting new investors, in addition to false promises that new recruits could partake in initial coin offerings at 20–30% below market value.

An extract of an allegation made by the SEC against Chunga in October 2021. Source: SEC

Chunga is accused of taking $3.7 million personally, which was spent on a $1.2 million house in Maryland, a $1.1 million condo in Dubai, a BMW and designer clothing, while Lee took around $140,000 in cryptocurrencies into a wallet under his control, the SEC said.

The business, which operated between June 2020 and May 2022, illustrates how fraud and noncompliance with U.S. securities laws in the cryptocurrency industry continue to run rampant, said Gurbir Grewal, director of the SEC’s Division of Enforcement in a Jan. 29 statement.

“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 seeks 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.

Related: SEC ‘deeply regrets’ errors related to crypto firm enforcement case

While Chunga is based in Maryland, Lee is an Australian national who the SEC believes is currently living in the United Arab Emirates.

Lee is also reportedly being probed by the Australian securities regulator after his other failed cryptocurrency business, Blockchain Global, collapsed in 2021 with $58 million owing to creditors, according to a Jan. 23 report by The Guardian.

The Australian Securities Investment Commission may pursue charges against Lee and his two business partners, Allan Guo and Ryan Xu, for potential breaches of the Corporations Act.

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