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Australian Entrepreneur Sam Lee Charged With Fraud In Connection with 1.89 Billion Dollar Cryptocurrency Scheme

FACT-CHECKED 1/30/2024 (click here to learn what this means)

Australian entrepreneur Sam Lee has been charged with fraud in the United States for his alleged involvement in operating the HyperVerse crypto investment schemes. This comes after three individuals were charged for their roles in a $1.89 billion cryptocurrency fraud scheme.

Lee's company, HyperVerse, was accused of running a pyramid scheme. Such schemes operate by attracting new investors with promising returns, then using funds from these new investors to pay returns to earlier investors. This process continues until there are no new investors left, at which point the scheme collapses.

The Department of Justice and the Securities and Exchange Commission unveiled the charges against Lee and his company. While the specifics of the case have yet to be fully disclosed, it is clear that Lee is facing serious legal consequences for his actions.

HyperVerse, the crypto investment scheme operated by Sam Lee and others, allegedly functioned as a classic Ponzi scheme, where new investors were promised quick profits, luring them in with promises of easy riches. From June 2020 to November 2022, HyperVerse offered and sold investment contracts under to the public through its online investment platform.

The company's promotional materials allegedly made various false claims, including that investors who purchased HyperVerse "memberships" would receive between 0.5% to 1% daily in passive rewards until the company either doubled or tripled the investor’s initial investment.

To convince investors that HyperVerse could make such payments, HyperVerse allegedly claimed that its payments would be disbursed in part from its revenues from large-scale crypto mining operations. However, the Department of Justice asserts that HyperVerse did not have such operations. With no apparent legitimate source of revenues, investor withdrawals were paid with new investor deposits.

The scheme began to unravel around July, 2021, when HyperVerse allegedly began to block investor withdrawals. This move likely sparked suspicion among investors, leading to a collapse of the scheme.

In addition to the main operation, HyperVerse allegedly also employed deception tactics. The company hired an actor to pretend to be the new CEO when HyperVerse was launched. This further added to the illusion of legitimacy and trustworthiness of the company.

It's worth noting that the actor who posed as the CEO of HyperVerse, Stephen Harrison, has expressed regret for the losses suffered by investors. He stated that he was unaware of the true nature of the company and its scheme until after he had completed his role.

While there are many cryptocurrency scams out there, there are also legitimate Cryptocurrency investment firms. Here are some ways to differentiate between the two from Knowledge Crypticles:

  • Audit Reports: Reputable cryptocurrency projects often undergo third-party audits for their smart contracts and security measures. Look for audit reports from well-known blockchain security firms to ensure the project’s code is secure and free from vulnerabilities.

  • Regulatory Compliance: Check if the project adheres to regulatory standards in the jurisdictions it operates. Compliance with legal requirements enhances the legitimacy of a cryptocurrency project and reduces the risk of regulatory issues in the future.

  • Team Transparency: Legitimate cryptocurrency projects often provide detailed information about their team members, including their professional backgrounds and experiences. Verify the credentials of key team members and ensure they have a track record in the blockchain or related industries.

  • Partnerships and Collaborations: Established partnerships with reputable companies and organizations can add credibility to a cryptocurrency project. Verify the claimed partnerships through official announcements and news sources.
The case highlights the risks associated with investing in cryptocurrency, especially through platforms like HyperVerse that promise high returns without any guarantee of profitability. The investigation into Lee's activities underscores the importance of due diligence when investing in cryptocurrency. While cryptocurrencies offer potential opportunities for financial growth, they also can carry significant risks.

*AI contributed to the writing of this article (click here to learn what that means)

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