If convicted of the scheme, the three face up to five years in federal prison.

U.S. Department of Justice | Image: Shutterstock

An Australian and two Americans have been charged with orchestrating a $1.9 billion cryptocurrency scam based on the so-called DeFi platform HyperFund, the U.S. Justice Department said on Monday.

The U.S. Department of Justice alleges that Australian citizen Sam Lee co-founded HyperFund, while Rodney Burton and Brenda Chunga promoted it, claiming that investment returns would come from what the court called a "non-existent cryptocurrency mining operation," and worked together to defraud investors of $1.89 billion.

“The extent of the alleged fraud here is staggering,” Erek L. Barron, the U.S. attorney for Maryland, said in a statement. “Whether it’s cryptocurrency fraud or any other financial fraud, if it sounds too good to be true, it probably is.

Barron added, “This office and our law enforcement partners will hold the perpetrators of these and other fraud schemes accountable.”

The U.S. Department of Justice said that from June 2020 to November 2022, the three allegedly offered and sold investment contracts to the public through HyperFund, making what the court called false allegations, including a HyperFund "membership" that provided investors with passive income rewards of 0.5% to 1% per day until the company doubled or tripled the investor's initial investment.

HyperFund claimed that part of its payments would be made from revenue from a large-scale cryptocurrency mining operation. The problem, the Justice Department said, was that the mining operation did not exist.

The U.S. Department of Justice said HyperFund began blocking investors from withdrawing their funds starting at least in July 2021.

Lee and Chunga are charged with conspiracy to commit securities and wire fraud, while Burton is charged with operating an unlicensed money transmitting business. If convicted, all three face up to five years in federal prison.

The DOJ noted that HyperFund is also known as HyperTech, HyperCapital, HyperVerse and HyperNation.

While cryptocurrency crime is not new, the Justice Department and other agencies, including the U.S. Securities and Exchange Commission, have stepped up efforts to curb alleged scams and schemes involving digital assets.

A report last month from blockchain intelligence firm TRM Labs said more than $1.7 billion in cryptocurrency could be stolen in 2023 alone. Earlier this month, hackers stole more than $4 million using alleged wallets through fake airdrops and scams targeting Solana holders.

“The illegal activity alleged in this case is exactly the type of conduct that IRS-Criminal Investigation and our law enforcement partners are dedicated to preventing,” said IRS-Criminal Investigation Acting Special Agent in Charge David Meisenheimer. “These charges send a clear message that we have the tools and internal fortitude to protect our financial system by diligently investigating, prosecuting, and holding accountable those who seek to defraud the American public.”