DOJ Charges Three in $1.9 Billion Crypto Fraud

An Australian and two Americans have been charged with masterminding a $1.9 billion cryptocurrency scam, the US Department of Justice announced on Monday.

The DOJ accused Australian citizen Sam Lee of running the HyperFund and promoting Rodney Burton and Brenda Chunga to defraud investors of $1.89 billion out of what the court called “non-existent cryptocurrency mining operations.”

“The level of fraud here is staggering,” Eric L. Baron, U.S. attorney for the District of Maryland, said in a statement. “Whether it's a cryptocurrency scam or another financial scam, if it seems too good to be true, it probably is.

“This office and our law enforcement partners will hold criminals responsible for these and other fraudulent schemes.” Baron added.

According to the Justice Department, between June 2020 and November 2022, the three offered and sold investment contracts to the public through HyperFund, which the court falsely claimed included HyperFund “memberships,” and secretly paid investors between 0.5 and 1 percent per day. The company rewards the investor until he doubles or triples his initial investment.

HyperFund claims that its fee will be paid in part from the proceeds from large crypto-mining operations. The problem, the DOJ says, is that the mining operation doesn't exist.

Starting at least July 2021, the DOJ said, HyperFund will begin to block investor withdrawals.

Lee and Chunga were charged with securities and wire fraud, while Burton was charged with running an unauthorized money-transmitting business. Chunga pleaded guilty. The three accused face a maximum sentence of five years in prison if convicted.

The DOJ is also known as HyperFund HyperTech, HyperCapital, Hyperverse and HyperNation.

While cryptocurrency crimes are not new, the Department of Justice and other agencies, including the US Securities and Exchange Commission, have stepped up efforts to prevent fraud and schemes involving digital assets.

Last month, a report by blockchain intelligence company TRM Labs said that more than $1.7 billion worth of cryptocurrency will be stolen in 2023 alone. Earlier this month, hackers stole more than $4 million through fake airdrops and scams targeting Solana property owners.

The Justice Department has not yet responded to Decrypt for comment.

“The alleged illegal activity in this case is precisely the type of IRS criminal investigation that our law enforcement partners are committed to preventing,” said David Meisenheimer, IRS criminal investigation officer. “These indictments send a clear message that we have the tools and internal strength to protect our financial system by diligently investigating, prosecuting and holding accountable those who attempt to defraud the American people.”

Edited by Ryan Ozawa.