DOJ Charges Three People in $1.9 Billion Crypto Scam

An Australian and two Americans have been charged with orchestrating a $1.9 billion cryptocurrency scam based around a purported DeFi platform, HyperFund, the U.S. Department of Justice said on Monday.

The DOJ accused Australian citizen Sam Lee of co-founding HyperFund and Rodney Burton and Brenda Chunga of promoting it, together defrauding investors of $1.89 billion by claiming that investment returns would come from what the court called “non-existent cryptocurrency mining operations.”

“The level of alleged fraud here is staggering,” U.S. Attorney Erek L. Barron for the District of Maryland said in a statement. “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.” Barron added.

From June 2020 to November 2022, the Justice Department said, the trio allegedly offered and sold investment contracts to the public through HyperFund, making what the court called false claims, including HyperFund “memberships” giving investors between 0.5% to 1% daily in passive rewards until the company either doubled or tripled the investor’s initial investment.

HyperFund claimed that its payments would be partially disbursed from its revenues from large-scale crypto-mining operations. The problem, the DOJ said, is that the mining operation did not exist.

Beginning in at least July 2021, the DOJ said, HyperFund began to block investor withdrawals.

Lee and Chunga are charged with conspiracy to commit securities and wire fraud, while Burton is charged with running an unlicensed money-transmitting business. Chunga pleaded guilty. The trio faces a maximum sentence of five years in federal prison if convicted.

The DOJ noted that HyperFund is also known as HyperTech, HyperCapital, HyperVerse, and HyperNation.

While cryptocurrency crimes are not new, the Department of Justice and other agencies, including the U.S. Securities and Exchange Commission, have stepped up efforts to curb scams and schemes allegedly involving digital assets.

A report by blockchain intelligence company TRM Labs last month said that over $1.7 billion in cryptocurrency had been stolen in 2023 alone. Earlier this month, hackers stole over $4 million using so-called wallet drainers through fake airdrops and scams targeting Solana holders.

The Department of Justice has not yet replied to Decrypt’s request for comment.

“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,” IRS Criminal Investigation acting special agent in charge David Meisenheimer said. “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.”

Edited by Ryan Ozawa.