The U.S. Justice Department charged two key people today with crimes related to the cryptocurrency trading platform HyperFund. They say the platform was mostly a scam that stole nearly $2 billion from investors.
Sam Lee, 35, who is from Australia, and Rodney Burton, 54, who lives in Miami, were both charged with trickster clients and stealing their money. Three people were charged in the case. Brenda Chunga, 43, of Severna Park, Maryland, pleaded guilty to plot charges.
“It’s unbelievable how much fraud is going on here,” said U.S. Attorney Erek L. Barron for the District of Maryland in a statement. If it sounds too good to be true, it probably is. This is true for cryptocurrency theft as well as all other types of financial fraud.
Police say Lee and others told people who bought “memberships” in HyperFund that they would get passive daily returns of 0.5 to 1% from the company’s supposedly large-scale cryptocurrency mining activities. The government says that these kinds of mining sites did not exist at all.
Officials say HyperFund took in more than $1.89 billion from investors who were fooled by their misleading ads that said their investments would double or even triple over time thanks to mining profits. When buyers tried to cash out, which they always did, their withdrawal requests were turned down.
“The defendants are charged with stealing $1.89 billion from investors,” said Nicole M. Argentieri, acting assistant attorney general, when the charges were announced.
“According to court documents, the defendants lied when they said that investors would get big returns from cryptocurrency mining operations, which did not happen.”
The Justice Department, Homeland Security Investigations (HSI), and the Internal Revenue Service’s Criminal Investigation unit (IRS-CI) all looked into the case in great detail, which led to the charges.
Officials say that the goal of their joint effort, which is called the El Dorado Task Force, is to find big cryptocurrency frauds.
“HSI will continue to keep American investors safe from scammers,” said Erin Keegan, acting special agent for HSI. David Meisenheimer, an acting special agent for the IRS, said that the charges “send a clear message that we have the tools and internal fortitude to protect our financial systems.”
Lee was arrested in another country and is now being extradited to the U.S. This week, Burton was caught in the U.S. If found guilty, both men could spend up to five years in jail. Chunga could also spend up to five years in prison for her part in the plot.
As more and more regular buyers become interested in cryptocurrencies, officials warn that the new market is still open to being hacked by smart con artists.
They tell people who want to invest that they should do a lot of study on any opportunity and that huge guaranteed returns are almost always a sign of fraud.