“As alleged in our complaint, 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.”
The Securities and Exchange Commission (SEC) has charged Xue Lee and Brenda Chunga with involvement in a fraudulent crypto asset pyramid scheme called HyperFund.
Lee, an Australian national who fled to Dubai in 2021, and Chunga, aka Bitcoin Beautee, have been charged with multiple violations of the Securities Act.
This scheme, active from June 2020 to early 2022, raised over $1.7 billion globally. Lee and Chunga allegedly promoted “membership” packages promising high returns from crypto asset mining and ties to a Fortune 500 company.
However, the SEC claims that HyperFund was a pyramid scheme with no real revenue source other than investor funds. The scheme collapsed in 2022, preventing investor withdrawals.
“Noncompliance in the crypto space facilitates schemes”
The SEC’s complaint, filed in Maryland, accuses Lee and Chunga of violating federal securities laws, seeking various penalties and injunctions. Chunga has agreed to settle, with terms to be determined. The case against Lee will proceed in court.
Additionally, the U.S. Attorney’s Office for the District of Maryland has announced criminal charges against Lee and Chunga. Chunga pleaded guilty to conspiracy to commit securities fraud and wire fraud.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “As alleged in our complaint, 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. 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.”
Brenda Chunga was the face of HyperFund’s US operation
Brenda Chunga, a U.S. resident and prominent HyperFund promoter, was notably the face of its U.S. operations. She rose to become one of only six global and two U.S. “corporate” presenters for HyperFund.
The scheme’s pretense was cryptocurrency mining, with HyperFund claiming revenue from large-scale crypto mining, including Bitcoin. However, it was later revealed that HyperTech Group was not engaged in significant Bitcoin mining.
HyperFund primarily relied on investor funds for revenue, making it a combined pyramid and Ponzi scheme. The operation collapsed in 2022 when investors could no longer withdraw their funds. In the U.S., HyperFund’s passive return investment was legally classified as a securities offering. The membership packages, treated as investment contracts and thus securities, were sold without proper registration or exemption.
While the SEC hasn’t disclosed the exact amount Lee extracted from HyperFund, Chunga is accused of directing at least $5 million in losses and personally siphoning over $3.7 million. She used these funds for lavish personal expenses, including a luxury birthday party/recruitment event, custom jewelry, a BMW, designer items, and real estate in Maryland and Dubai.
Chunga also falsely claimed to be earning over $5 million annually through HyperFund, using this as a recruitment tactic. Much of her theft was from the Ponzi scheme, but she also directly received funds from investors, charging them a 1% to 3% fee, totaling $1.1 million.
