On Monday, the US Department of Justice (DOJ) disclosed that it had charged two Americans and one Australian for orchestrating a crypto scam worth $1.9 billion.
The cryptocurrency scam in question was based around HyperFund, a purported Decentralized Finance (DeFi) platform.
The DOJ
Sam Lee, an Australian citizen, was accused of co-founding HyperFund, while the DOJ accused both Brenda Chunga and Rodney Burton of promoting the scam.
According to the DOJ, they defrauded investors of $1.89 billion by claiming that investment returns would be generated via crypto mining operations that did not exist.
Erek L. Barron, the US Attorney for the District of Maryland, said that the level of alleged fraud seen in this case was staggering.
The lawyer asserted that if something sounds too good to be true, it probably is, regardless of whether it is crypto fraud or any other financial fraud for that matter.
Barron added that the office as well as their law enforcement partners would ensure that perpetrators carrying out these fraudulent schemes are held accountable.
The Justice Department said that from June 2020 to November 2022, the three individuals had allegedly offered and sold investment contracts to the public via HyperFund.
The scam
The court said that the individuals had made false claims, which include ‘memberships’ of HyperFund, and had promised passive rewards to investors between 0.5% and 0.1% daily.
These rewards were to be given until the company was able to double or triple the initial investment of investors.
According to HyperFund, it would generate revenues from large-scale mining operations, which would then be used for partially disbursing payments.
The DOJ said that the main problem was that there was no mining operation whatsoever for generating revenues.
It further revealed that starting in July 2021, HyperFund had begun to block customers from making withdrawals.
The charges
The charges filed against Burton are for running an unlicensed money transmitting business, while charges of conspiracy to commit wire and securities fraud were made against Chunga and Lee.
Chunga has pled guilty to the charges. The three are facing a maximum sentence of five years in federal prison in the event of a conviction.
According to the DOJ, HyperFund also goes by other names, such as HyperNation, HyperVerse, HyperCapital, and HyperTech.
Even though crypto scams are certainly not a new occurrence, the Department of Justice as well as other agencies like the Securities and Exchange Commission (SEC) have become more proactive.
These agencies have stepped up their efforts to curb schemes and scams that involve digital assets in some way.
Last month, TRM Labs, a blockchain intelligence company, revealed that the value of crypto stolen in 2023 stood at $1.7 billion.
Earlier in January, hackers had stolen almost $4 million from Solana holders using wallet drainers via scams and fake airdrops.
The IRS Criminal Investigation Department said that the illegal activity involved in the latest case is exactly the type of conduct they want to deter.
It said that the charges show that financial systems can be protected through diligent investigation and prosecution.