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The U.S. regulatory authority SEC uncovered a crypto pyramid scheme that stole approximately US$2 billion from investors, as U.S. authorities allege in criminal and regulatory proceedings against the scheme’s promoters.
Xue Lee and Brenda Chunga have been charged by the (SEC) for violating US securities laws. The charges are related to the HyperFund scheme, which promised investors high returns from crypto mining. The company posed to be a part of the U.S. regulatory ecosystem and prompted investors to invest heavily.
The SEC uncovered this pyramid scheme by determining that HyperFund had no legitimate revenue sources besides the monetary assets gathered from the investors who were prompted to invest. These investors were shown a fake portfolio promising massive guaranteed results.
The director of the SEC’s division of enforcement, Gurbir Grewal, 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.”
In a parallel case, the US Department of Justice also suspects Lee Chunga, and Rodney Burton for their alleged involvement in the $1.9 billion HyperFund scheme. This particular case can be considered a sub-branch of the pyramid scheme previously discussed, and legal charges are entailed.
According to the available information, Chunga has admitted to committing securities and wire fraud once. However, her legal sentencing is not due until May 1. Chunga also agreed to the monetary and legal settlements that the regulatory authorities will determine The settlement is subject to court approval. Lee, however, is charged with multiple offenses, including conspiracy to commit wire fraud and securities fraud. This particular charge is being prosecuted as a criminal offense. Burton is charged for allegedly participating in a scheme to run a money-transmitting business without a license. Additionally, Burton has been charged with operating an unlicensed money-transmitting business.
The SEC has requested a permanent injunction in the federal district court in the District of Maryland to prohibit the defendants from participating in crypto asset offerings or multi-level marketing. Additionally, the SEC is seeking the return of any profits gained through illegal means, with interest and civil penalties.
Grewal stated, “This case illustrates yet again how noncompliance in the crypto space facilitates schemes where promoters capitalize on the promise of easy money without providing the detailed investor protection disclosures required by the registration provisions of the federal securities laws.”