A promoter of the HyperVerse crypto investment scheme has been arrested and charged in the US for his alleged role in the scheme, with court documents claiming he was part of a network that made “fraudulent promotional presentations” to investors and potential investors.
Rodney Burton, who goes by the name “Bitcoin Rodney”, was arrested in Florida on Friday and remains in custody pending transfer to Maryland, where the charges were laid. He has been charged with operating and conspiring to operate an unlicensed money transmitting business.
The US Internal Revenue Service (IRS) alleges in court documents that a network of promoters of the Hyper schemes made “fraudulent promotional presentations” for an investment operation that generated revenue from bitcoin mining, which the IRS alleges did not exist.
It is the first time charges have been laid against anyone involved in the HyperVerse scheme.
A Guardian investigation has revealed the scheme’s links to Australian Sam Lee and his business partner Ryan Xu, two of the directors of the Australian blockchain company Blockchain Global, which collapsed owing creditors $58m.
Lee was the chairman of the HyperTech group, while Xu was listed as the group’s founder. The two men were featured prominently in online promotional material for the Hyper schemes, with both speaking as part of the HyperVerse global launch event in December 2021.
The HyperVerse scheme was the subject of multiple consumer warnings from financial authorities around the world, but escaped the attention of regulators in Australia.
Lee and Xu have been referred to the Australian Securities and Investments Commission (Asic) for potential breaches of the Corporations Act in relation to Blockchain Global, but Asic has said it does not intend to take action at this time.
Neither Lee nor Xu is mentioned in the US court documents relating to the criminal complaint against Burton.
Lee did not respond to a request for comment on the arrest; Xu could not be contacted.
Burton’s appointed public defence lawyer also did not respond to the Guardian’s request for comment by time of publication.
In an affidavit in support of the criminal complaint and arrest warrant lodged in the US district court of Maryland, IRS special agent Andrew Accardi alleges that Burton was a promoter of HyperFund, which also operated under the names HyperTech, HyperCapital, HyperVerse and HyperNation.
The court documents, reported by the website courtwatch.news and seen by the Guardian, refer to all of the schemes collectively as HyperFund.
The affidavit claims that an IRS analysis of Burton’s personal and company bank records shows that from June 2020 to January 2022, Burton received 562 wire transfers or cashier’s checks, totalling US$7,851,711, from individuals who wished to invest in HyperFund.
The affidavit also outlines how the scheme allegedly worked.
“HyperFund operated a purportedly legitimate decentralized finance, or ‘DeFi,’ cryptocurrency investment platform,” Accardi states.
“A network of HyperFund promoters … made fraudulent promotional presentations to investors and potential investors. In those presentations, promoters touted HyperFund’s investment programs, including the purported returns that prospective investors could earn from investing with HyperFund. Potential investors were told that they could purchase ‘memberships’ in the ‘world’s most sustainable passive rewards program’.”
The scheme falsely claimed that investors who purchased memberships would receive daily rewards of between 0.5% to 1% daily, until the investor’s initial investment doubled or tripled in value, the affidavit alleges.
“To convince investors that HyperFund could make these daily payments of passive rewards, HyperFund claimed that its payments would be disbursed in part from revenues generated from large-scale crypto mining operations,” the affidavit says.
“In fact, HyperFund did not have any such operations. To the extent investors saw the accrual of any rewards, those investors were paid with funds collected from more recent investors.”
A scheme using the funds of later investors to pay off early investors is commonly known as a Ponzi scheme, although this term is not used in the court documents.
Accardi further alleges that of the 562 payments documented, 342 were made after HyperFund began blocking people from being able to make withdrawals in mid-2021.
“In other words, in and after July 2021, Burton took investors’ fiat currency and transferred worthless HU [hyper units] from his HyperFund account to investors’ HyperFund Accounts.”
Burton, a 54-year-old American, has promoted his wealth on various social media channels, including boasting in March 2022 that he bought two Rolls-Royce cars on the same day.
He also recorded himself shopping for a $3.5m yacht, and claims to have bought a diamond-encrusted Audemars Piguet watch worth $1.4m.
In February 2021, Burton posted pictures on social media of himself with Ryan Xu in Dubai, calling him a “multi billionaire” and an “amazing human”.
In a video posted online of Xu speaking at a dinner with Burton for lunar new year, Xu says that “we are going to change the world together”. Xu says he decided to travel to Dubai to meet HyperFund promoters because it was a “very special moment”.
“You guys, for so many hours, fly here to Dubai, so I think I should make my move and at least make everyone think we are family, we are united and we are going to change the world together.”
When asked about the future of HyperFund, Xu says: “We are trying to revolutionise the entire financial system.”
“If we come together and join the same platform, and we can have the same idea and then we can have the same consensus, and we keep recruiting our army, and one day if our army reaches one billion people, then the whole world belongs to us. That is our vision.”
Burton says in the video the plan is “super exciting”.
During the Dubai trip, Burton boasted in social media posts about eating steak enrobed with 24-carat gold and claimed he received $1,000 from the “owner and founder of my current crypto program” for a lunar new year gift, along with “a nice Mont Blanc pen from our management team”.
He also went on a shopping spree in Dubai, showing purchases from a range of luxury brands, including Louis Vuitton and Balenciaga.