Australian blockchain entrepreneur Sam Lee has been charged with conspiracy to defraud in the United States for his alleged involvement in operating the HyperVerse crypto investment scheme that allegedly defrauded investors of US$1.89 billion. Court documents describe it as a “pyramid scheme and pyramid scheme.” (A$2.86 billion).
Erec L. Barron, the U.S. attorney for Maryland, said the Justice Department will “hold the perpetrators of these and other fraudulent schemes accountable,” and that if convicted, Lee could face up to five He said he could be sentenced to years in prison.
“The level of fraud allegations here is staggering,” Baron said.
of criminal charges The lawsuit filed in Maryland District Court charges Lee with conspiracy to commit securities fraud and wire fraud. Individual civil litigation The U.S. Securities and Exchange Commission charged Mr. Lee with fraud and unregistered sale of securities in violation of U.S. securities laws.
The charges against Mr Lee, once dubbed the “crown prince of Bitcoin” in Australia, come alongside the charges and arrest of Brenda Chunga, another US promoter of the Hyperverse and Hyperfund cryptocurrency schemes. , he pleaded guilty to conspiracy to commit securities fraud and wire fraud. for her role.
The criminal complaint alleges that Lee and his co-conspirators operated the hyper scheme for the purpose of “unjustly enriching” themselves by directing investors into the scheme.
“It was also part of the conspiracy that Lee and his co-conspirators knowingly devised and attempted to devise plans and schemes to defraud and obtain money and property by false and fraudulent pretenses, representations and promises. ” the complaint alleges.
If found guilty, the law requires Mr. Lee to “discharge any ill-gotten gains” he received directly or indirectly as a result of the scheme.
Although court documents collectively refer to the crypto schemes run by HyperTech Group as HyperFund, the funds operated under a variety of names, including HyperCapital, HyperFund, HyperVerse, and HyperNation.
Mr. Lee was chairman of HyperTech Group, which he co-founded with business partner Ryan Xu. Xu’s name does not appear in court documents.
The accusations come after a Guardian Australia investigation revealed widespread investor losses, the use of a fake chief executive to launch the HyperVerse plan, and the failure of a bankrupt Australian cryptocurrency to which Mr Lee was affiliated. This comes after details of the scheme’s operations were revealed, including the relationship between the companies Blockchain Global and HyperVerse. He was the director.
The SEC’s complaint filed against both Lee and Chunga alleges that the lawsuit “collected more than $1.7 billion from victims around the world, including millions of dollars from investors in the United States, “A multi-level crypto-asset related marketing pyramid and Ponzi scheme is involved.” .
The criminal complaint alleges that Hyperfund was a “global securities fraud and wire fraud scheme that netted approximately US$1.89 billion from victim investors around the world” and estimates that losses were much higher. .
Gubir S. Grewal, head of the SEC’s Enforcement Division, claims that Mr. Lee and Mr. Chunga attracted investors with the lure of profits from mining crypto assets. It was all from investors’ pockets.”
“This lawsuit alleges that compliance violations in the cryptocurrency space capitalize on promises that promoters will make easy money without providing the detailed investor protection disclosures required by the registration provisions of federal securities laws. It shows once again how we are facilitating schemes.”
The SEC’s complaint outlines Lee’s alleged role in operating the Hyperfund scheme, alleging that he was “centrally involved throughout Hyperfund’s life cycle.”
“According to information and belief, Mr. Lee was not only a co-founder of Hyperfund, but maintained control over Hyperfund throughout its existence,” the SEC alleges.
From approximately June 2020 to approximately November 2022, Lee and Chunga sold Hyperfund memberships and “made materially false and misleading statements regarding investments and engaged in a scheme to knowingly or recklessly deceive investors.” He defrauded investors of more than $1.7 billion.” – By luring them with false promises of guaranteed high returns from investing in securities.
“Defendants were reckless in knowing or failing to know that their statements regarding Hyperfund’s revenues and profits were materially false and misleading.” was reckless in knowing or not knowing that he was planning to defraud investors in the securities of
The SEC further alleges that Mr Lee’s business background and relationships with Australian companies were used to attract investors to the scheme, and that he played a “significant role in the distribution of Hyperfund members”. .
“Mr. Lee’s appearances and speeches during the launch of HyperVerse were for the purpose of offering securities. Mr. Lee’s reputation and crypto public persona have led investors to believe that Hyperfund is a well-known I was led to believe that it was not a scam because it was backed by a crypto entrepreneur.
“These details add legitimacy and credibility to the plan, convincing investors that not only their funds are safe, but that the funds they expect are coming from legitimate sources. It was used to make
Court documents allege that Hyperfund was operated as a Ponzi scheme, with funds from later investors used to repay earlier investors.
“Hyperfund had no actual source of income other than the funds it received from investors, and Defendants had no basis for the promised returns,” the document alleges.
“Mr. Lee, as one of Hyperfund’s founders, does not generate sufficient income for Hyperfund to be reasonably expected to meet its payment obligations to investors, other than income generated from the sale of new products. It was reckless to know, or to not know, that membership in Hyperfund was, therefore, a pyramid scheme. ”
Hyperfund’s compensation system used to attract new investors is “nothing more than a pyramid scheme solicitation tool,” court documents allege.
Investors in HyperFund and subsequent iterations purchased a “membership” package that promised 0.5% daily rewards and 300% returns in 600 days. The SEC’s complaint states that investors were told that these “exorbitant passive profits” were derived from Hyperfund’s crypto mining operations, “but these representations are false. “It was,” he claims.
Mr. Lee, who launched Hyperfund in mid-2020 and appeared at Hyperverse’s launch presentation in 2021, said he did so “knowing that the representations made by Hyperfund’s promoters regarding large-scale crypto mining are false.” He is said to have continued to make false statements.
The court documents also address Hyperfund’s contention that it does not offer investment products through the sale of memberships, and that it does not offer investment products through the sale of memberships, and that it does not offer investment products with a reasonable expectation that the funds will be invested in a public company. The so-called Howie test is applied to verify the existence of Benefits derived from the efforts of others.
According to the docket, Li, who has been living in Dubai since 2021, has not yet appointed a lawyer. Guardian Australia has contacted Lee for comment. He previously denied that HyperVerse was a scam, claiming it was only involved in money management and the technology side of the business.
The charges against Mr. Lee and Mr. Chunga are the result of a joint investigation conducted by the New York-based Department of Homeland Security’s El Dorado Task Force and the Internal Revenue Service’s Criminal Investigation Division.
The Eldorado Task Force is the oldest anti-money laundering task force in the United States, with more than 200 members targeting sophisticated financial crimes, including in the cyber and virtual currency areas.
Although Mr Lee is an Australian citizen and Australian companies are central to promoting the Hyper Group investor system, he has escaped the scrutiny of Australia’s corporate watchdog, the Australian Securities and Investments Commission.
Since Guardian Australia’s investigation into the Hyperverse project, Asic has announced it will assess the liquidator’s report into Blockchain Global, which collapsed in 2021 owing A$58 million to creditors.
