Victoria Police Requested HyperVerse Information in 2020, Returns Case to ASIC 22 Months Later
In 2020, Australia’s corporate watchdog, the Australian Securities and Investments Commission (ASIC), forwarded information regarding the alleged US$1.89 billion “Ponzi scheme” known as HyperVerse to Victoria police. However, after nearly two years, the case was returned to ASIC without any further action taken.
ASIC referred the information to Victoria police for potential “fraud offences” following concerns raised with the corporate regulator regarding Blockchain Global, a related company. ASIC did not elaborate on the specific reasons behind the referral.
The HyperVerse crypto investment schemes were operated by the HyperTech group, which was established by two directors of Blockchain Global, Sam Lee and Ryan Xu.
“In 2020, ASIC referred information regarding the HyperVerse matter to Victoria Police after learning that VicPol was conducting inquiries into the alleged conduct. ASIC determined that the matter, not being a financial product, fell under the jurisdiction of the police, who were deemed best placed to investigate potential fraud offenses,” said an ASIC spokesperson.
Neither ASIC nor Victoria Police provided additional details regarding the alleged conduct.
“ASIC takes any misconduct seriously, especially when it harms investors. We have the authority to address misconduct related to financial products and services. When we become aware of conduct outside our jurisdiction, we endeavor to refer the information to the appropriate agency,” the spokesperson added.
However, Victoria Police stated that after assessing the information, they determined nearly two years later that ASIC was better equipped to further investigate.
During this period, Blockchain Global collapsed, leaving creditors owed $58 million. Meanwhile, Lee and Xu promoted what the US Securities and Exchange Commission alleges was a “global, crypto asset-related, multi-level marketing pyramid and Ponzi scheme” defrauding investors worldwide of US$1.89 billion. Xu is not named in the SEC legal action.
A Victoria Police spokesperson confirmed receiving a referral from ASIC in April 2020 but stated that it was not assessed until 2021. After the assessment, it was concluded that ASIC was better suited to handle the matter further, and Victoria Police did not proceed with an investigation.
The matter was transferred back to ASIC in January 2022.
When questioned about the 22-month duration of the process, the Victoria Police spokesperson stated, “All alleged matters of this nature are initially assessed to determine if any criminal offenses have occurred and if Victoria Police is the appropriate authority to handle the case. Depending on the circumstances, this assessment process can take some time.” The spokesperson declined to provide further details on the assessment.
ASIC expressed its belief that the referral was being actively pursued. “ASIC understood that the matter was under active consideration by Victoria Police. Victoria Police is ultimately best positioned to explain their decision to refer the matter back to ASIC,” the ASIC spokesperson said. “At the time Victoria Police referred the matter back to ASIC, external administrators had been appointed to Blockchain Global. ASIC is currently reviewing the information contained in liquidators’ reports regarding the scheme.”
At the time of ASIC’s referral to Victoria Police, the first of the Hyper schemes – HyperCapital – was already in progress, having commenced in Hong Kong in 2019. HyperCapital underwent rebranding as HyperFund in 2020 and later transitioned to HyperVerse in December 2021.
Lee, who has refuted claims that the scheme was fraudulent and has asserted that his involvement in HyperVerse was limited to the technological and fund management aspects, faces both criminal and civil charges in the US for his purported central role in the scheme. Xu has not faced charges and is not mentioned in the US legal proceedings.
Lee, Xu, and their fellow Blockchain Global director Allan Guo have been reported to ASIC by the liquidator in his report for potential breaches of the Corporations Act related to Blockchain Global.
Guo is not believed to be connected to the HyperVerse scheme and is not mentioned in the US legal proceedings. He has not responded to inquiries from Guardian Australia.
Following Guardian Australia’s investigation into HyperVerse, ASIC declared its intention to evaluate the liquidator’s report on Blockchain Global.
The SEC complaint against Lee alleges that he leveraged his position as a founder of Blockchain Global – even after it entered administration – to promote the HyperFund and HyperVerse schemes.
“Lee showcased his business acumen by presenting himself as the CEO of Blockchain Global. However, at that juncture, this statement omitted crucial information that would have been significant to investors, considering the circumstances in which it was made – namely, that Blockchain Global had ceased business operations, a fact known to Lee or recklessly disregarded by him,” the SEC complaint states.
“Lee also neglected to disclose that he had resigned as a director from Blockchain Global, and that the company had ceased all operations.”
According to court documents, a senior US promoter named Brenda Chunga, who has been charged and pleaded guilty to conspiracy to commit securities and wire fraud, heavily relied on the HyperTech group’s association with Blockchain Global to promote the scheme to potential investors.
“In HyperVerse presentations … Chunga consistently emphasized the connection with Blockchain Global and purportedly highlighted how this connection lent credibility to the HyperFund project and enhanced the safety of the investment.”
ASIC has defended its decision not to issue a warning regarding the HyperFund and HyperVerse investment schemes, despite multiple investor alerts issued overseas throughout 2021 and 2022.
Lee has declined to respond to inquiries from Guardian Australia, while Xu could not be reached for comment.