Crypto Analyzer

U.S. charges trio in massive crypto pyramid scheme

The US Securities and Exchange Commission (SEC) has charged three individuals in connection with a massive cryptocurrency pyramid scheme. According to the SEC, the scheme involved HyperFund, an operation that allegedly functioned as a pyramid scam with no revenue sources other than investors’ capital.

Gurbir 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.”

In a parallel criminal case, the US Department of Justice has charged the trio — Lee, Chunga, and Rodney Burton — for their alleged roles in the $1.9 billion HyperFund scheme. Chunga has pled guilty to one count of conspiracy to commit securities fraud and wire fraud and is scheduled for sentencing on May 1. Lee faces one count of conspiracy to commit securities fraud and wire fraud, while Burton is charged with operating an unlicensed money transmitting business.

Chunga has agreed to settle the SEC’s charges, with the terms of her settlement, including disgorgement and monetary penalties, pending court approval. On the other hand, the SEC’s case against Lee will be litigated, as will the criminal charges.

The SEC’s complaint, filed in federal district court in the District of Maryland, seeks permanent injunctive relief, injunctions preventing defendants from participating in multi-level marketing or crypto asset offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

Grewal emphasized the importance of compliance within the crypto space, noting that noncompliance can facilitate schemes where promoters capitalize on the promise of easy money without providing the necessary investor protection disclosures required by the registration provisions of the federal securities laws.

This case serves as a stark reminder of the risks associated with fraudulent activities within the cryptocurrency industry and highlights the ongoing efforts by regulatory authorities to address misconduct and protect investors.