US: Two Charged In $1.89 Billion Crypto Fraud Scheme, Third Member Pleads Guilty

Опубликовано: 31 Январь 2024

Bitcoins Gold DustTwo individuals are charged for their alleged role in a nearly US$2 billion crypto fraud scheme. A third member pleaded guilty the same day. (Photo: Alesia Kozik, Pexels, License)

Authorities in the United States charged Monday three individuals tied to a US$1.89 billion cryptocurrency fraud scheme, in which two of them allegedly defrauded investors through fake crypto mining operations; the third defendant pleaded guilty the same day.

Sam Lee, 35, and Rodney Burton, a.k.a “Bitcoin Rodney,” 54 are charged with orchestrating the scheme through the online investment platform HyperFund. The two conspirators allegedly made false claims to investors that they could guarantee double or triple return on investments, despite the fact that the platform didn’t actually have any crypto operations written in place.

“As alleged in court documents, the defendants falsely represented that investors would receive substantial returns paid from cryptocurrency mining operations, which did not in fact exist,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division.

Co-conspirator Brenda Chunga, a.k.a “Bitcoin Beautee,” 43, pleaded guilty to her role in the fraud scheme.

From June 2020 to November 2022, the group allegedly promoted Hyperfund to prospective investors and sold “membership” packages, wherein they guaranteed customers daily returns of up to one percent until they had doubled or tripled the initial investment.

To sell the lie that the platform could live up to such a benchmark, authorities said, the group touted that payments would be distributed from large-scale crypto mining operations.

In reality, however, HyperFund was not capable of running such investment operations, as none had actually been programmed for it.

“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,” said Gurbir S. Grewal, Director of the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement.

“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,” he explained.

By July 2021, HyperFund began to block investor withdrawals.

If convicted, Lee faces a potential maximum sentence of five years in federal prison for conspiracy to commit securities fraud and wire fraud. He currently resides in the United Arab Emirates, prosecutors said, a state with which the U.S. does not have an extradition treaty.

Burton, meanwhile, has been arrested and faces one count of conspiracy to operate an unlicensed money transmitting business and one count of operating an unlicensed money transmitting business. If convicted, he faces a maximum penalty of 10 years in prison.

As part of Chunga’s plea agreement, she admitted that she personally profited by as much as $3 million from her role in the conspiracy. In addition to a potential five year sentence, she will pay back at least the full $3 million as restitution, though the final penalty could be significantly higher, the judge said.

The SEC issued a crypto investor alert back in 2013, in which they warned that criminals will use virtual currencies to lure people into Ponzi schemes and defraud unwitting investors.

From time to time, it seems, a reminder is necessary.

“The level of alleged fraud here is staggering,” said United States Attorney for the District of Maryland Erek L. Barron. “Whether it’s cryptocurrency fraud, or any other financial frauds, if it sounds too good to be true, it probably is.”