According to the SEC’s complaint, from June 2020 through early 2022, Lee and Chunga promoted HyperFund “membership” packages, which they claimed guaranteed investors high returns, including from HyperFund’s supposed crypto asset mining operations and associations with a Fortune 500 company. As the complaint alleges, however, Lee and Chunga knew or were reckless in not knowing that HyperFund was a pyramid scheme and had no real source of revenue other than funds received from investors. In 2022, the HyperFund scheme collapsed and investors were no longer able to make withdrawals.

“As alleged in our complaint, Lee and Chunga attracted investors with the allure of profits from crypto asset mining, but the only thing that HyperFund mined was its investors’ pockets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “This case illustrates yet again how noncompliance in the crypto space facilitates schemes where promoters capitalize on the promise of easy money, without providing the detailed investor protection disclosures required by the registration provisions of the federal securities laws.”

The SEC’s complaint, filed in federal district court in the District of Maryland, charges Lee and Chunga with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctive relief, conduct-based injunctions preventing the defendants from participating in multi-level marketing or crypto asset offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. Chunga agreed to settle the charges, to be permanently enjoined from future violations of the charged provisions and certain other activity, and to pay disgorgement and civil penalties in amounts to be determined by the court at a future date. The settlement is subject to court approval. The charges against Lee will be litigated.

In a parallel action, the U.S. Attorney’s Office for the District of Maryland today announced criminal charges against Lee and Chunga. Chunga pleaded guilty to conspiracy to commit securities fraud and wire fraud.

The SEC’s ongoing investigation is being conducted by David Snyder and Assunta Vivolo, assisted by Tom Bedkowski, of the SEC’s Crypto Assets & Cyber Unit (CACU). It is being supervised by David Hirsch and Jorge Tenreiro of the CACU and Nicholas Grippo and Scott Thompson of the Philadelphia Regional Office. The litigation will be conducted by Judson Mihok and Gregory Bockin of the Philadelphia Regional Office. The Commission appreciates the assistance of the U.S. Attorney’s Office for the District of Maryland; the Department of Justice, Fraud Section; Homeland Security Investigations New York; and the IRS.

The SEC’s Office of Investor Education and Advocacy directs investors to resources on detecting and avoiding pyramid schemes. Investors can find additional information about pyramid schemes at Investor.gov.