U.S. Department of Justice Charges Three with $1.9 Billion Worth of Cryptocurrency Fraud

If convicted of the scheme, the three men face up to five years in federal prison.

US Department of Justice | Photo: Shutterstock

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

The U.S. Department of Justice alleges that Australian citizen Sam Lee co-founded HyperFund, while Rodney Burton and Brenda Chunga jointly defrauded investors by promoting it and claiming that returns on investment would come from what the court called a “non-existent cryptocurrency mining operation.” 1.89 billion dollars.

“The extent of the alleged fraud here is shocking,” Maryland U.S. Attorney Erek L. Barron said in a statement. “Whether it’s cryptocurrency fraud or any other financial fraud, if it sounds too good to be true, it probably is.

Barron added, “The office and our law enforcement partners will hold the perpetrators of these and other fraud schemes accountable.”

The U.S. Department of Justice said that from June 2020 through November 2022, three people allegedly offered and sold investment contracts to the public through HyperFund, making what the court called false allegations, including that HyperFund “memberships” provided investors with passive income of 0.5 percent to 1 percent a day The HyperFund “membership” provided investors with a passive income bonus of 0.5% to 1% per day until the company doubled or tripled the investor’s initial investment.

HyperFund claimed that a portion of its payments would be made from the revenues of the massive cryptocurrency mining operation. The U.S. Department of Justice says the problem is that the mining operation doesn’t exist.

From at least July 2021, HyperFund began blocking investor withdrawals, the U.S. Department of Justice said.

Lee and Chunga are charged with conspiracy to commit securities and wire fraud, while Burton is accused of running an unauthorized money transfer business. If convicted, the three men face up to five years in federal prison.

The U.S. Department of Justice noted that HyperFund is also known as HyperTech, HyperCapital, HyperVerse and HyperNation.

While cryptocurrency crimes are nothing new, the DOJ and other agencies, including the SEC, have stepped up efforts to curb alleged scams and schemes involving digital assets.Bitmain Miner

A report last month by blockchain intelligence firm TRM Labs said more than $1.7 billion in cryptocurrencies will be stolen in 2023 alone. Earlier this month, hackers stole more than $4 million through fake airdrops and scams targeting Solana holders using so-called wallets.

David Meisenheimer, Acting Special Agent in Charge of IRS CID, said, “The illegal activity alleged in this case is exactly the type of behavior that IRS CID and our law enforcement partners are committed to stopping, and these allegations send a clear message that we have the tools and the internal fortitude to do just that by diligently investigating, prosecuting those who attempt to defraud the American public and holding them accountable to protect our financial system.”