Blockchain Global founder Sam Lee charged with ‘staggering’ $US1.89bn cryptocurrency fraud

Australian Sam Lee, whose Blockchain Global failed leaving local creditors $58m out of pocket, has now been charged with a massive $US1.89bn fraud by US regulators.

Sam Lee, founder of Blockchain Global and HyperFund.

Australian Sam Lee, whose Blockchain Global failed leaving local creditors $58m out of pocket, has now been charged with a massive $US1.89bn fraud by US regulators after his alleged co-conspirator “Bitcoin Beautee” pleaded guilty.

The US Securities and Exchange Commission (SEC) has filed suits against Mr Lee, 35, of Elsternwick, Victoria, Brenda Chunga, also known as “Bitcoin Beautee”, of Maryland in the US, as well as Rodney Burton, also known as “Bitcoin Rodney’’, of Miami.

Among the allegations are that Mr Lee’s company HyperFund, which court documents state “claimed to be a project dedicated to creating a so-called “decentralised finance (DeFi) ecosystem” for crypto asset market participants’’ even hired an actor to pose as its chief executive officer in order to bilk investors out of their money.

Fake HyperVerse chief executive Steven Reece Lewis.

HyperFund was also spruiking Mr Lee’s Australian company Bitcoin Global as proof of its bonafides, despite that company having already collapsed owing creditors about $58m.

The SEC, in a lengthy claim which was made public this week, said HyperFund’s “goals evolved and utilised various names in an effort to capitalise on the buzz words and Zeitgeist of the day, including rebranding itself as ‘HyperVerse’ and, later, as ‘HyperNation,’ a

version of the project which featured an individual in a mask discussing creating a decentralised government to escape the societal bonds of inequality and injustice through blockchain technology’’.

The now defunct fund, the SEC says, was offering membership packages promising returns of 0.5 per cent to 1 per cent per day, leading to a purported tripling of the initial investment in 600 days.

“HyperFund also implemented a pyramid scheme-like referral system to reward existing members for recruiting new investors,’’ the court documents state.

The SEC says Mr Lee was a central figure in HyperFund as a co-founder of a related company, HyperTech, which claimed to be involved in large-scale crypto mining - which the SEC alleges it was not - while Chunga “was one of HyperFund’s top promoters and arguably the face of its United States presence’’.

“Chunga’s recruitment efforts through online seminars and videos included the typical promotional ruses associated with fraudulent multi-level marketing schemes,’’ the SEC alleges.

Hyperfund spruiker Bitcoin Beautee, AKA Brenda Chunga, has pleaded guilty.

The SEC says Chunga’s pitch was successful, and she received more than $US3.7m in payments from the platform and also directly from investors, which she used to fund an extravagant lifestyle.

“HyperFund, however, was a pyramid and Ponzi scheme,’’ the SEC says.

“HyperFund had no real source of revenue other than funds received from investors, and defendants had no basis for the promised returns.

“HyperFund did not engage in large-scale crypto asset mining, despite the claims by promoters like Chunga that the investors’ passive rewards were being paid by such efforts.

“HyperFund even hired an actor to pretend to be the new CEO when HyperVerse was launched.

“With no apparent legitimate source of revenues, investor withdrawals were paid with new investor deposits.’’

The SEC says that in late 2021, HyperFund rebranded as HyperVerse and started spruiking the creation of a virtual world which people could enter using an avatar.

“During this launch event, which took place live online and was recorded and then

made available publicly online, HyperVerse presented a new supposed CEO of HyperVerse, ‘Steven Reece Lewis’,’’ the SEC says.

“In a recorded video played during the launch event, Lewis thanked everyone for their participation and for giving him ‘the chance to share more about HyperVerse, our operations, and future direction’.

“In reality, the person presented as Lewis was an actor playing a role of a fabricated character.’’

Videos of the fake chief executive’s sales pitch still exist online.

A later pitch to investors featured a narrator wearing a gold mask who called himself “Mr. H”.

“The new narrative claimed that blockchain technology would help to combat inequality and injustice in HyperNation’s new decentralised government,’’ the SEC documents state.

HyperNation was offering non-fungible tokens (NFTs), which could be bought with investors’ HyperVerse rewards, however they also had to kick in another $US10,000, it is alleged.

By 2022 HyperVerse had collapsed, with investors unable to access their funds, the SEC says.

Despite this, the SEC says Mr Lee continued to spruik a recovery plan well into 2023, and appeared in a video saying he was planning to rebuild HyperVerse, ‘’For realz this time!’’

“To date, it does not appear as though Lee has relaunched HyperVerse,’’ the court documents state.

Australian-based Blockchain Global was also allegedly presented as a key plank in the HyperFund group, despite having already failed.

Chunga said in presentations in December 2021, the claim says, that Blockchain Global had “Partnerships with governments and Fortune 500 companies around the world’’.

“In reality, as reported in a November 2021 article, Blockchain Global had entered

‘voluntary administration’ (a self-administered restructuring procedure), owing creditors a

reported $US21 million, an estimate that was later increased to approximately $US50 million. “The article stated that Lee had ‘stepped down as a director’ in March 2019.’’

United States Attorney for the District of Maryland Erek L. Barron said this week, “The level of alleged fraud here is staggering’’.

“Whether it’s cryptocurrency fraud, or any other financial frauds, if it sounds too good to be true, it probably is. This office and our law enforcement partners will hold perpetrators accountable for these and other fraud schemes.”

If convicted, Mr Lee faces a maximum sentence of five years in US federal prison for conspiracy to commit securities fraud and wire fraud.

Mr Burton has been arrested and remains in detention while Chunga last week pleaded guilty to conspiracy to commit securities fraud and wire fraud and awaits sentencing.

Mr Lee is now living in Dubai, the US Justice Department says.