US Justice Department charges three Individuals for $1.89 bn cryptocurrency fraud scheme

The US Justice Department has declared charges against two individuals and the guilty plea of a third individual for arranging a $1.89 billion cryptocurrency fraud scheme.

Sam Lee, 35, an Australian citizen residing in Dubai, United Arab Emirates, was charged in an indictment unsealed for allegedly co-founding HyperFund, also known as HyperTech, HyperCapital, HyperVerse, and HyperNation. Rodney Burton, 54, of Miami, and Brenda Chunga, 43, of Severna Park, Maryland, were promotors of HyperFund.

“The defendants are charged with defrauding investors to the tune of $1.89 billion. As alleged in court documents, the defendants falsely represented that investors would receive substantial returns paid from cryptocurrency mining operations, which did not in fact exist,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “With our partners in Homeland Security Investigations and IRS Criminal Investigation, we are committed to uncovering sophisticated frauds involving cryptocurrency and digital assets and bringing those who perpetrate them to justice.”

“The level of alleged fraud here is staggering,” said U.S. Attorney Erek L. Barron for the District of Maryland. “Whether it’s cryptocurrency fraud, or any other financial frauds, if it sounds too good to be true, it probably is. This office and our law enforcement partners will hold perpetrators accountable for these and other fraud schemes.”

As per the court documents, from June 2020 to November 2022, Lee and the other two allegedly offered and sold investment contracts to the public through HyperFund’s online investment platform. The promotional materials of HyperFund allegedly made various false claims, including that investors who purchased HyperFund “memberships” would receive between 0.5% to 1% daily in passive rewards until the company either doubled or tripled the investor’s initial investment. To convince investors that HyperFund could make such payments, HyperFund allegedly claimed that its payments would be disbursed in part from its revenues from large-scale crypto mining operations, when in truth, HyperFund did not have such operations. Beginning in at least July 2021, HyperFund allegedly began to block investor withdrawals.

“Today’s charges are a testament to the incredible work of HSI New York’s El Dorado Task Force,” said Acting Special Agent in Charge Erin Keegan of Homeland Security Investigations (HSI) New York. “I commend our law enforcement partners, including those at HSI Baltimore, for their outstanding collaboration. HSI will continue to protect American investors from financial predators.”

“The illegal activity alleged in this case is precisely the type of conduct IRS Criminal Investigation and our law enforcement partners are committed to deterring,” said Acting Special Agent in Charge David Meisenheimer of the IRS Criminal Investigation (IRS:CI) Washington, D.C. Field Office. “These charges send a clear message that we have the tools and internal fortitude to protect our financial systems by diligently investigating, prosecuting, and holding accountable those who seek to defraud the American public.”

Lee is charged with one count of conspiracy to commit securities fraud and wire fraud. If convicted, he faces a maximum penalty of five years in prison. Burton is charged by criminal complaint with one count of conspiracy to operate an unlicensed money transmitting business and one count of operating an unlicensed money transmitting business. He also faces a maximum penalty of five years in prison on each count. Chunga pleaded guilty today to one count of conspiracy to commit securities fraud and wire fraud. She faces a maximum penalty of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.