The Securities and Exchange Commission (SEC) has taken legal action against Xue Lee and Brenda Chunga, also known as Sam Lee and Bitcoin Beautee, for allegedly orchestrating a fraudulent scheme worth $1.7 billion. The SEC has charged them with fraud and conducting an unregistered securities offering.
Lee and Chunga managed to amass more than $1.7 billion from investors worldwide between June 2020 and early 2022. The SEC contends that their venture, HyperFund, which was presented as an opportunity for investors to participate in profitable mining operations, was actually a pyramid scheme devoid of legitimate revenue sources. The SEC alleges that both Lee and Chunga were aware of or recklessly ignored this fact. In 2022, the scheme collapsed, leading to substantial losses for investors.
Gurbir S. Grewal, director of the SEC’s division of enforcement, emphasized the significance of compliance in the cryptocurrency sector, where fraudulent schemes often exploit the allure of quick profits without adhering to the necessary investor protection disclosures mandated by federal securities laws.
The SEC filed a complaint in the federal district court located in the District of Maryland, accusing Lee and Chunga of violating federal securities laws' anti-fraud and registration provisions. Additionally, the U.S. Attorney’s Office for the District of Maryland has brought criminal charges against the two individuals.
Chunga has already admitted guilt to conspiracy charges related to securities fraud and wire fraud. Furthermore, he has agreed to settle the charges and will be subject to disgorgement and civil penalties to be determined by the court.
