Australian Sam Lee Accused in $1.89B ‘Ponzi Scheme’ and U.S. Fraud Plot

Sam Lee, an Australian blockchain entrepreneur, is accused of being involved in the HyperVerse cryptocurrency investment schemes, which are characterised in court records as a “pyramid and Ponzi scheme” that defrauded investors out of US$1.89 billion (A$2.86 billion). Lee is charged with conspiracy to commit fraud in the US.

Australian Sam Lee Accused in $1.89B 'Ponzi Scheme' and U.S. Fraud Plot
Source: The Guardian
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Lee may spend up to five years in prison if found guilty, according to US Attorney Erek L. Barron, who stated that the Department of Justice will “hold perpetrators accountable for these and other fraud schemes.”

“This amount of purported fraud is astounding,” stated Barron.

In a separate civil complaint filed by the US Securities Exchange Commission, Lee is accused of fraud and of selling securities without registration in violation of the US Securities Act. The criminal complaint filed in the Maryland district court accuses Lee of conspiracy to commit securities and wire fraud.

Alongside the accusations and arrest of Brenda Chunga, another US promoter of the HyperVerse and HyperFund cryptocurrency scams, who has pled guilty to conspiracy to conduct securities and wire fraud for her involvement, there are charges against Lee, who was nicknamed the “crown prince of bitcoin” in Australia.

According to the criminal complaint, Lee and his accomplices ran the Hyper scams with the intention of “unjustly enriching themselves” by luring investors into the fraud.

The complaint additionally states that Lee and his accomplices willfully planned to create a scheme and artifice to deceive and gain money and property by false and fraudulent pretences, representations, and promises. This was a second component of the conspiracy.

It mandates that Lee “disgorge all ill-gotten gains” he may have obtained as a direct or indirect result of the schemes in the event that he is found guilty.

Although the funds operated under a variety of names, including HyperCapital, HyperFund, HyperVerse, and HyperNation, the court records refer to the cryptocurrency schemes managed by the HyperTech organisation together as HyperFund.

Co-founding the HyperTech organisation with business partner Ryan Xu, Lee served as chairman. The court filings do not contain Xu’s name.

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The charges follow the disclosure of information about the scheme’s workings by a Guardian Australia investigation, which included large investor losses, the employment of a fictitious CEO to introduce the HyperVerse scheme, and HyperVerse’s connections to the defunct Australian cryptocurrency company Blockchain Global, of which Lee was a director.

A global, crypto asset-related, multi-level marketing pyramid and Ponzi scam that collected over $1.7 billion from victims worldwide, including millions from U.S. investors, is the subject of the SEC’s complaint, which has been filed against both Lee and Chunga.

According to the federal complaint, HyperFund was a “global securities fraud and wire fraud scheme that obtained approximately US$1.89 billion from victim-investors world-wide,” estimating that the losses were greater.

Gurbir S. Grewal, head of the SEC’s division of enforcement, claims that Lee and Chunga enticed investors with the promise of cryptocurrency asset mining income, but that “all that HyperFund mined was its investors’ pockets.”

“This case demonstrates once more how schemes where promoters take advantage of the promise of easy money are made possible by noncompliance in the crypto space, without providing the comprehensive investor protection disclosures required by the registration provisions of the federal securities laws.”

According to the SEC complaint, Lee was “centrally involved with HyperFund throughout its lifecycle,” outlining his claimed involvement in running the HyperFund scams.

The SEC claims that Lee was not only a co-founder of HyperFund but also retained control over the organisation over its whole existence.

Allegations are made that between roughly June 2020 and roughly November 2022, Lee and Chunga sold HyperFund memberships and “engaged in a scheme to defraud investors – bilking the investors out of over $1.7 billion – by enticing them with the false promise of guaranteed, high returns from investments in securities and made materially false and misleading statements about the investments.”

“Defendants made materially false and misleading statements about the returns and profits of HyperFund, which they knew about or recklessly disregarded.” Furthermore, the defendants were irresponsible in their ignorance or knew that they were running a scam to mislead investors in the securities of HyperFund.

In addition, the SEC claims that Lee was instrumental in the promotion of HyperFund memberships, drawing investors to the scam with his connections to Australian businesses and business experience.

“Lee made a securities offer during his speech and attendance at the HyperVerse launch. Because HyperFund was supported by a well-known cryptocurrency asset entrepreneur, investors were led to believe that it was a legitimate venture thanks to Lee’s reputation and public image.

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