How HyperVerse Crypto Ponzi Scheme Defrauded Investors of $1.89 Billion

Australian cryptocurrency entrepreneur Sam Lee has been charged in the US for his alleged role in a “pyramid and ponzi scheme.” Lee, 35, along with two US nationals, Rodney Burton and Brenda Chunga, was involved in operating the HyperVerse crypto investment schemes which defrauded investors of $1.89 billion, per the court documents. The US Department of Justice charged that the three co-founded the Hyperverse/HyperFund, also known as HyperTech, HyperCapital, HyperVerse, and HyperNation, which collected money from investors for a bogus crypto-mining operation.

The charges against the once-dubbed “crown prince of bitcoin” come after months of investigation. Last year, the liquidator of Blockchain Global entity ACX.io told 7.30 that he had reported Lee to the corporate watchdog ASIC for potential breaches of the Corporations Act. It was further revealed that Lee was also linked to several failed ventures overseas, per ABC News.

What is Sam Lee accused of?

The criminal complaint against Lee alleges that he along with his co-conspirators operated the Hyper schemes to “unjustly enrich themselves.” The complaint lodged in the district court of Maryland charges Lee with conspiracy to commit securities and wire fraud. Further, a separate civil complaint brought by the SEC charges Lee with fraud and with the unregistered sale of securities in breach of the US Securities Act.

Erek L Barron, the US attorney for the District of Maryland, said “The level of alleged fraud here is staggering,” and she added that all the conspirators will be held accountable for their actions, as per The Guardian.

What is the HyperVerse scam?

The US Securities and Exchange Commission (SEC) has labeled the string of Hypererse schemes as fraudulent cryptocurrency pyramid schemes. Further, according to the US Department of Justice court documents, Lee and his co-conspirators allegedly sold investment contracts through an online investment platform from June 2020 to November 2022.

In the company's promotional materials, false claims mentioned that investors who purchased memberships would receive between 0.5% to 1% daily in passive rewards until the company either doubled or tripled its initial investment. The company allegedly claimed to disburse the payments in part from its revenues from large-scale crypto-mining operations which did not exist. Since July 2021, the company allegedly started blocking investor withdrawals.

The SEC’s complaint highlights that Lee knew or was reckless in not knowing the operation was a pyramid scheme. He further had no real source of revenue other than funds received from investors, the complaint said as per ABC News.

Charges against the conspirators of HyperVerse

As per the court documents, Lee is charged with one count of conspiracy to commit securities fraud and wire fraud and he could potentially face up to five years in prison if convicted. The co-conspirator, Burton is charged with one count each of conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business. He faces a maximum penalty of five years in prison on each count as well. Meanwhile, Chunga has pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud and she faces a maximum penalty of five years in prison.

The outcome of the case and the sentence will be determined by a federal district court judge after considering the US Sentencing Guidelines and other statutory factors.