The US Securities and Exchange Commission (SEC) filed charges on Monday (January 29) naming Xu Lee (aka Sam Lee) and Brenda Chunga (Bitcoin Beautee) as involved in a crypto asset pyramid scheme called HyperFund, Defrauded more than $1.7 billion from investors around the world.

According to the SEC's complaint, from June 2020 to early 2022, Lee and Chunga promoted so-called HyperFund "membership" packages and claimed that these packages would ensure high returns for investors from HyperFund's so-called crypto asset mining operations and its ties to a Fortune Global 500 company. However, as the charge sheet states, Lee and Chunga likely knew that HyperFund had no other source of income than the money it received from investors and was in fact a pyramid scheme. By 2022, the HyperFund scheme collapsed and investors could no longer withdraw money.

Gurbir S. Grewal, director of the SEC's Division of Enforcement, said: "As stated in our complaint, Lee and Chunga lured investors through the profits of the so-called crypto mining business, but in reality HyperFund's 'mining' business was nothing more than mining investors' pockets." "This case is another example of how violations in the crypto space have facilitated MLM-like misconduct, and the industry has failed to comply with detailed investor protection disclosure requirements under the federal securities laws."

The SEC complaint, filed in U.S. District Court in Maryland, alleges that Lee and Chunga violated the anti-fraud and registration provisions of the federal securities laws, and seeks a permanent conduct based injunction prohibiting the defendants from engaging in multi-level marketing activities or crypto asset offerings, as well as a return of ill-obtained gains, restitution of pre-judgment interest, and payment of civil penalties. Chunga agreed to settle the charges with the SEC, accept an injunction against her participation in the related and other specified activities, and agree to return ill-obtained gains and pay a civil penalty based on an amount subsequently determined by the court. The settlement is subject to court approval. In addition, the SEC's charges against Lee will be filed in court.

At the same time, the U.S. Attorney's Office in the United States Court of Maryland also filed criminal charges against Lee and Chunga on the same day. Chunga pleaded guilty to conspiracy to commit bond fraud and wire fraud.