Between early 2020 to late 2021, I received at least seven emails from readers that all had one thing in common.

They wanted my take on a crypto project called HyperFund.

One of the readers detailed the situation to me. Here’s an excerpt of his email:

Hi, Sam. I’ve been very impressed with your articles. I dipped my toe in and bought into bitcoin and Ethereum… and up to now am doing very well.

In one of your articles, you wrote that you could smell a scam a mile off, and we could ask for your opinion.

I did my due diligence as best as I could on one crypto project that I’m interested in. I searched for the company on Google. After putting all the key facts together, I decided to give it a try with a little bit of money.

I was hoping you might have heard about it and could give me your opinion.

As I say, the name of the investment was HyperFund. Below are some of the key “facts” the reader sent me about this project:

They own the largest crypto mining farm in the world! They are major stakeholders ¡n over 200 crypto projects worldwide, including Binance!

They work closely with governments and universities… Amazon Prime featured the founders in a documentary about crypto and blockchain… They own their own bank.

Each package receives daily rewards of 0.5% up to 1% each day, seven days a week. Packages pay a total of 300% returns.

The “billionaire founders” of the project were a couple guys named Ryan Xu and Sam Lee. They oversaw HyperTech Group, which managed HyperFund.

After seeing the same name pop up time and time again, and having taken a look at what it was offering, my “smell a scam from a mile off” radar was going bonkers!

While I was unable to categorically claim it was a scam, I told all of these readers the same thing: “HyperFund isn’t something I’d go near myself, and absolutely not something I’d put to subscribers.”

With crypto entering a new bull market, we’ll see more scams like this pop up. So in today’s essay, I’ll tell you the three simple steps I take – and that you can take – to spot a crypto scam from a mile off.

Before I get to them, let me tell you how this scam played out…

The HyperFund Scam

On January 29, the Department of Justice charged three individuals with defrauding investors in connection to the HyperFund scheme.

(The scheme also went by the name HyperTech, HyperCapital, HyperVerse, and HyperNation.)

The three defendants in the case are Sam Lee, Rodney Burton (aka Bitcoin Rodney), and Brenda Chunga (aka Bitcoin Beautee). They’re accused of defrauding investors of nearly $2 billion.

According to the complaint, “The defendants falsely represented that investors would receive substantial returns paid from cryptocurrency mining operations, which did not in fact exist.”

Burton has been charged, arrested, and detained, and he faces up to 10 years in jail for operating an unlicensed money transmitting business.

Chunga took a plea deal, but she still faces up to five years in prison and has to pay $3 million in restitution.

And Lee, if convicted, also faces up to five years in prison for conspiracy to commit securities fraud and wire fraud.

I saw their websites, read the material, the claims, the enticement, the “backgrounds” of the founders. It was a slick operation – very convincing – and appealed with great urgency to investors’ sense of FOMO (fear of missing out).

It was easy to see how someone unexperienced could fall for the scam. But for me, it was littered with red flags.

Now, I don’t know if my readers lost their funds invested before they contacted me. I’m guessing some did. But hopefully I helped them all avoid further damage.

The most frustrating thing about this case, though, is that a lot of those investors could’ve avoided losing their funds if they just followed three simple steps.

Three Steps You Can Take to Avoid Crypto Scams

I’ve been in the crypto space for nearly 14 years. And I’ve seen everything from dodgy exchanges to pyramid schemes.

I’ve seen fake websites, spoof celebrity endorsements, and rug pulls (where developers remove all liquidity from a market, leaving their token worthless).

Over the years, I developed acumen for spotting these scams. In particular, three easy steps to identify the red flags of a scam.

These are:

  • Weird links and dodgy information.

  • Roadblocks.

  • Promises that can never be kept.

When these readers asked me whether HyperFund was a scam, I took a look and ran it through my checklist.

First, take a look at the information on the website.

With HyperFund’s website, there were links that were dead ends, links that led back to the homepage and not the information they claimed to link to, and the team webpage didn’t show actual profiles.

A lot of the information was unverifiable, didn’t check out with credible sources, and seemed like a gigantic maze.

As I said to one reader, “It’s weird, and there are red flags, as their site has next to no useful information, the links all just revert back to the homepage, and some links don’t even link out to anything at all.”

This is often a good indicator that something sketchy is going on.

Second, are you discouraged or blocked from withdrawing your funds?

One reader explained that with HyperFund, when he went to withdraw funds, he wasn’t allowed to.

These scams will always find an excuse to stop you from accessing funds. Usually it’s a “threshold” that isn’t met, or there’s a surprise “tax” or “extra fee” that needs to be paid before funds are released.

Truth is, the money isn’t there. It doesn’t exist, and any gains you’re told are in your account aren’t real.

As I explained to another reader, “HyperFund seems just to be a fancy multilevel marketing scheme – it seems a bit suspect to me. And if you don’t control access to your funds at all times, then it’s really suspect.”

And third, are they guaranteeing results without considering proper risks?

Legitimate sites, platforms, and services can and will make bold claims, and many can deliver on those claims. In crypto, sometimes what you think is impossible really is possible.

But what credible organizations will never do is guarantee performance or outcomes. The good guys will always be transparent about risk.

As I explained to another reader asking about HyperFund, “To promise forward-looking gains is, well… In the U.K., if I were to promise gains like that, it’d be a breach of Financial Conduct Authority rules and regulations.”

Make Sure to Always Do Your Due Diligence

If you’re new to crypto, you need to know it’s fraught with people who are trying to rip you off.

That means you’ve got to keep your wits about you. That can be scary, but that’s why you’ve got me in your corner.

I always encouraged my readers to write in and ask if something is a scam. It’s often hard to categorically say yes, but if there’s enough red flags, then it’s easy to stay away.

And that’s exactly what I told every single reader who wrote to me asking about HyperFund over the years.

Spotting this scam wasn’t too hard for me. The red flags I saw were obvious. They continue to be obvious for similar scams to this day.

And in crypto, if you can start with the three steps I’ve outlined above, you can operate in this market with a little more confidence.

These three steps are a good starting point. But it can be a complex world that’s hard to navigate if you’re inexperienced, and sometimes even if you are experienced.

What I suggest is that if you have any questions about crypto scams, you can always send them to me. (Just know that I can’t give individualized advice.)

If you’ve got a story you want told to help others avoid a scam, or if you’re not sure if something you might be involved in is a scam or not, write in. Ask away.

The more people we can help be safe in crypto, the better off we’ll all be.

Until next time,

Sam Volkering
Analyst, Palm Beach Daily