Australia’s corporate watchdog referred information about the alleged US$1.89bn “Ponzi scheme” known as HyperVerse to Victoria police in 2020, only for it to be referred back almost two years later without any action being taken.
The Australian Securities and Investments Commission made the referral to Victoria police for alleged “possible fraud offences” after concerns were raised with the corporate regulator about a related company, Blockchain Global. Asic did not provide detail on what prompted the referral.
The HyperVerse crypto investment schemes were run by the HyperTech group, which was founded by two of Blockchain Global’s directors, Sam Lee and Ryan Xu.
“Asic referred information relating to the HyperVerse matter to Victoria Police in 2020, after being advised that VicPol were making inquiries into the [alleged] conduct, and after determining that it was not a financial product and that the police were best placed to investigate [alleged] possible fraud offences,” an Asic spokesperson said.
Neither Asic nor Victoria police would provide further detail on the alleged conduct.
“Asic takes any misconduct seriously that harms investors and we have the power to act against misconduct relating to financial products and services,” the spokesperson said.
“Where we are made aware of conduct that does not fall within our jurisdiction, we seek to refer information about the conduct to the appropriate agency.”
However, Victoria police said it assessed the information and decided almost two years later that Asic was “best placed to look at it further”.
In the intervening period, Blockchain Global collapsed, owing creditors $58m, and Lee and Xu promoted what the US Securities and Exchange Commission has alleged was a “global, crypto asset-related, multi-level marketing pyramid and Ponzi scheme” that allegedly defrauded investors globally of US$1.89bn.
Xu is not named in the SEC legal action.
A spokesperson for Victoria police confirmed a referral was received from Asic in April 2020, but the matter was not assessed until 2021. After that assessment, “it was determined the lead agency should be Asic”.
“It was assessed and an investigation was not subsequently conducted by VicPol following that assessment – it was determined Asic were best placed to look at it further,” the spokesperson said.
The matter was transferred back to Asic in January 2022.
Asked why the process took 22 months, the Victoria police spokesperson said: “All [alleged] matters of this nature are first assessed to see if any criminal offences have been committed and if it is best placed to sit with Victoria Police. Depending on circumstances, this can take some time.”
The spokesperson declined to comment on what the assessment entailed.
Asic said it believed the referral was being acted on.
“Asic understood that the matter was under active consideration by VicPol. VicPol is ultimately best placed to explain their decision to refer the matter back to Asic,” the spokesperson said.
“At the time VicPol referred the matter back to Asic, external administrators had been appointed to Blockchain Global. Asic is currently considering the information contained in liquidators’ reports in relation to the scheme.”
At the time of the Asic referral to Victoria police, the first of the Hyper schemes – HyperCapital – was under way, having launched in Hong Kong in 2019. HyperCapital was rebranded as HyperFund in 2020, becoming HyperVerse in December 2021.
Lee, who has denied claims the scheme was a scam and has said his role in HyperVerse was confined to the technology and funds management side of the business, faces both criminal and civil charges in the US for allegedly being “centrally” involved in the scheme. Xu has not been charged and is not named in the US proceedings.
Lee and Xu, and the fellow Blockchain Global director Allan Guo, have been referred to Asic by the liquidator in his report for alleged potential breaches of the Corporations Act in relation to Blockchain Global.
Guo is not believed to be involved in the HyperVerse scheme and is not named in the US proceedings. He has not responded to questions from Guardian Australia.
After Guardian Australia’s investigation into HyperVerse, Asic announced it would assess the liquidator’s report on Blockchain Global.
The SEC complaint against Lee alleges that he used his role as a founder of Blockchain Global – even after it was in administration – to promote the HyperFund and HyperVerse schemes.
“Lee touted his business prowess by introducing himself as the CEO of Blockchain Global. At that time, however, that statement omitted information that would have been material to investors given the context in which it was made – namely, Blockchain Global had ceased business operations, a fact Lee knew or recklessly disregarded,” the SEC complaint says.
“Lee also failed to mention that he stepped down from Blockchain Global as a director, and that the company no longer had any operations.”
The court documents allege that a senior US promoter, Brenda Chunga, who has also been charged and has pleaded guilty to conspiracy to commit securities and wire fraud, relied heavily on the HyperTech group’s links with Blockchain Global to promote the scheme to potential investors.
“In HyperVerse presentations … Chunga continued to stress the connection with Blockchain Global and why this connection supposedly gave credibility to the HyperFund project and increased the safety of the investment.”
Asic has defended its failure to issue a warning about the HyperFund and HyperVerse investment schemes, which were the subject of multiple investor warnings overseas throughout 2021 and 2022.
Lee has declined to answer questions from Guardian Australia, while Xu could not be reached for comment.
