Sam Lee is getting ready to scam people with his new Ponzi scheme, StableDAO. Legal proceedings in Australia are giving us information about his first crypto
First, I want to say that Blockchain Global was a platform for cloud mining. Because of this, its business model is different from StableDAO and Lee’s different Hyper* Ponzi schemesss
With Blockchain Global, what matters is what is going on behind the scenes.
We already know that co-conspirators Lee (also known as Samuel Lee and Xue Lee) and Ryan Xu started Blockchain Global (aka Zijing Xu).
Blockchain Global began as Bitcoin Group, a company that bought and sold cryptocurrencies and mined them.
The Bitcoin Group changed its name to Blockchain Global in 2016. ACX, a cryptocurrency exchange, was split off from Blockchain Global in 2017.
In 2020, Blockchain Global and ACX failed. In the fall of that year, Xu and Lee ran away to Dubai.
Based on the claims that were sent to the liquidators, Blockchain Global and ACX lost $48.9 million.
As liquidators and probably also law enforcement were looking for them, it’s not a coincidence that Xu and Lee were found in Dubai. The emirate is known for giving scammers a place to hide from the law.
This week, the Victorian Supreme Court heard about the end of Blockchain Global and ACX. Because of this, we now know more about how Lee pulls off his scamsch
Poor record keeping, mixing invested funds with other funds, taking investor money for personal use, and, in the end, gambling away invested funds
Sarah Danckert of the Sydney Morning Herald has been writing about what’s going on;
The court heard on Wednesday that Blockchain Global’s ACX exchange took the money its customers put into trading cryptocurrency and put it all into one pooled fund. This is against the rules for licensed stockbrokers and trading groups, but not for the cryptocurrency market, which is mostly unregulated.
When Blockchain Global’s chief technology officer, Jin Chen, was questioned by a lawyer for the liquidators, Andrew Silver, on Wednesday, he said that the company kept few records of each customer’s trades and holdings.
Invested funds were mixed with the founder’s own money, a loan taken out against ACX’s client balances (which the clients didn’t know about), and supposed trading profits.
Chen also told the court that Blockchain’s co-founder, Allan Guo, who at different times worked as the group’s chief operating officer and chief investment officer, told him to move bitcoin from the pool of customer funds to other parts of the business.
Other ways that client funds were used were:
- investing into a cannabis themed shitcoin;
- investing in shares of a Canadian company;
- topping up Blockchain Global’s founder’s and staff’s bank accounts; and
- paying off Blockchain Global’s founder’s and staff’s mortgages
Again, Blockchain Global and ACX clients didn’t know any of this.
Customers of Blockchain Global were told that their money would be safe while they traded on Blockchain’s popular ACX exchange.
Lee and Xu set up bank accounts in the names of staff family members who had nothing to do with the business. This was done to avoid getting caught by the government.
The court heard that Blockchain Global, a successful exchange with thousands of customers, kept getting “debanked” by different banks. This is when a bank stops doing business with a customer because they work in the cryptocurrency industry.
Guo’s mother and then his mother-in-law set up bank accounts for the group with the help of companies set up in the names of Guo’s mother and grandmother. This made the group’s banking process easier.
Guo also told the court that Blockchain Global set up a second company in the name of Guo’s then-wife so that Blockchain Global could get an Austrac registration.
Allan Guo, also known as Liang Guo, was the COO and CIO of Blockchain Global. In Australia, he and CTO Jin Chen were left holding the bag.
The investigation into Blockchain Global is still going on, but proceedings in the Supreme Court strongly suggest that $48.9 million in losses is a very low estimate.
Andrew Silver, a lawyer for the company’s liquidators, questioned Allan Guo, the company’s former chief investment officer, about how much money was transferred out of the company. Guo said it was a lot.
Silver asked Guo, “What would you say if I told you that hundreds of millions of dollars had been taken out of gateway accounts in this way and then put into other exchanges?” Would it have cost a hundred million dollars or more? “
Guo responded: “Total, sure.”
It would be foolish to think that Xu and Lee’s HyperCash, HyperCapital, HyperFund, and Hyperverse Ponzi schemes were run any differently.
And, since recent events are more important, how Lee will run StableDAO is less clear.
“Prime bank capital protection by Citibank” is one of the main ways that StableDAO tries to sell itself.
So, if StableDAO has any contact with CitiBank, I can promise that neither “StableDAO” nor Sam Lee will be made public.
Since Lee and Xu haven’t been caught yet and Xu hasn’t been seen in public since late 2021, it’s impossible to estimate how much money people have lost because of HyperCash.
Considering how big HyperFund got, I can guess that consumer losses are probably well over a billion. Most of that money is thought to come from investors in the US.
With StableDAO, Lee wants to do it all over again.
You buy STBL tokens, and Lee and his partners in crime, early investors, and top recruiters take your money.
I’m not sure what will come of the Blockchain Global proceedings, since Australian authorities have no more power over Dubai’s corrupt officials than US authorities do.
We’ll let you know about any important changes.