Front Burner - A fake CEO, a failed investment scheme, and millions lost

Episode Date: January 25, 2024

A scheme called HyperVerse attracted more than a billion dollars in investments and endorsements from celebrities including Chuck Norris and Apple co-founder Steve Wozniak. But a Guardian Australia investigation found that the CEO of HyperVerse didn’t even exist. Sarah Martin, a senior correspondent with Guardian Australia, explains how the scheme worked, who was behind it, and how regular people lost a lot of money. For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts Transcripts of each episode will be made available by the next workday.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Damon Fairless. So it's December 2021. Welcome to our distinguished guests, ladies and gentlemen. Thank you for joining us today.

This is an online launch event. The presenter is wearing an elegant white evening dress. She's in front of a big screen with a futuristic logo on it that says Hyperverse. Ladies and gentlemen, here we would like to tell you the metaverse is here. Beware it matters. The global launch of Hyperverse is happening right now. The CEO of this new company appears on the screen. The Hyperverse world will be a virtual world where everyone can begin a new life of new discoveries and possibilities, and where you can explore, work, play, and interact with each other in a decentralized environment.

He's introduced as Stephen Rhys-Lewis. He's got a lot of achievements and creds, and he looks the part. He's got a dark business suit on, a crisp white shirt. creds. And he looks the part. He's got a dark business suit on, a crisp white shirt. And then, not long after the launch, the Hyperverse Twitter feed posts video endorsements from celebs like Chuck Norris. And Apple co-founder Steve Wozniak. I'm here to support Stephen and Hyperverse. Two Steves again? The thing is, Stephen, the CEO, Stephen Rhys-Lewis, he's not real. There's no such guy.

And the Hyperverse, it collapses. And it takes with it an estimated $1.3 billion from investors across the globe. Sarah Martin is with The Guardian Australia. She's an investigative journalist, and she's been covering all things Hyperverse. And Martin is with The Guardian Australia. She's an investigative journalist and she's been covering all things hyperverse. And she's here with me now. Hey, Sarah, thanks so much for coming on FrontBurner. My pleasure to be here.

Okay, so the hyperverse. This has been described by some regulators as a pyramid scheme, possibly a scam. I know the Guardian's been avoiding using the word scam, and you describe it as a multi-level marketing scheme. Maybe it's best to kind of put aside labels and just tell me, how does it work? So people were told to buy a membership in either Hyperverse or Hyperfund, which was the precursor to Hyperverse. And through that membership, you were offered daily rewards with a 300% return over 600 days and daily rewards of 0.5% as a minimum. So people were told they were going to get a huge return on their membership.

In terms of the activity behind that, in Hyperfund, they were told that this was going to be generated through Bitcoin mining operations, which were backed by the multi-billion dollar group of companies behind the scheme. And then in Hyperverse, it was a little less clear, but basically people were told that their membership would be to the Metaverse. And the Metaverse was this sort of new frontier, and people were encouraged to come on board early to take advantage of this new intergalactic space where they would be able to live out this new virtual world in an avatar of their choice. And somehow that was going to generate these astonishing rewards for them. Okay.

So I'm already lost and no fault of yours. It just sounds really kind of arcane and complicated. So let's break it down a bit. So there's more than the Hyperverse. There's a number of different things associated with this all kind of branded with hyper. They're basically being asked to come in, invest, and then you have to pull in people. And the more people you pull in, the more you reward. How is this purported reward system working? Break that down for me. So absolutely, yes. Like a classic pyramid scheme, people were incentivized

to bring in new people. So you accumulated your daily rewards, even if you were a passive investor, but you could turbocharge your rewards by bringing people into the scheme. And that was sort of structured in a way that down to 20 levels. So your downline, if you recruited someone, again, this is like classic multi-level marketing stuff, but if you recruited someone into your downline, you would get a cut of their membership fees paid and so on and so forth down the chain, down to 20 levels. So early on in the scheme, people in those upper tiers made a lot of money very quickly. And of course, I think we know how this story ends. The people at the bottom are the ones who really lose out when the whole thing falls over.

So there were early investors who did see some money, but then the hammer kind of dropped and people started losing money, right? I mean, I know you've talked to folks who've lost a lot of money. So I guess I'm just curious what they've told you. How did they realize they weren't getting their money back? Yeah. So basically, there were limits on when you could withdraw your rewards. And how it worked was that you could convert your rewards that were accumulating in something called hyperunits. You could convert your rewards into a cryptocurrency and then withdraw those funds. But obviously, throughout the whole program, you're encouraged to keep your rewards in

the system and to accumulate them. And obviously, if you're getting such incredible returns, then why wouldn't you? And of course, early in the piece, many people sort of test the system. You know, they might put in their minimum amount. They see if they can withdraw it they go okay this this system's amazing i'm getting these incredible rewards like i'm all in like sell the house tap into your superannuation like this is amazing and so um it's sort of one of those uh perverse things about the scheme is that that early success um

sort of begets greater later failure so you know you know, as this grew and, of course, again, like classic multi-level marketing schemes, you're mostly introduced to it through someone you know and you trust, which is, again, how these things proliferate so rampantly. So, yeah, look, early on people did make a lot of money. And one of the first people I spoke to when I was investigating this was actually a guy in Tuscany, Italy, who he was saying that it had been quite incredible because early on in the piece there were these dudes like driving around in Lamborghinis, making an obscene amount of money. People were like, I want in on that.

They joined up and then, you know, they weren't driving Lamborghinis. They lost a lot of money. And so some of these people who made a lot of money early had, I mean, they couldn't walk down the street anymore. There were so many people angry at them for their losses and some of them had left to Dubai. It had just torn this little town apart, allegedly. So I think that's a pretty common story. And of course, you've got that interesting and in many cases, traumatic dynamic

where someone you know introduced you to the scheme, they had made money, but then the person they bring in loses money. So all the complications that come with that, not just about the loss of money, but the loss of trust and the, you know, the destruction of relationships as a result. A couple things stand out to me. One is that we're talking about this after you've done this really quite considerable work on it and uncovered a lot of it. But at the time, I mean, there's also a woman you spoke with just said, you know, it was really believable. So I know that we're talking, you know, the way we're talking about it now, it seems kind of silly that people would invest their money, but I guess, I guess one of the things that stands out is that there was a period of time when it seemed legit at some level.

Oh, absolutely. I imagine most people come to this with a degree of skepticism and say, hey, buddy, this sounds too good to be true. And you know, your, your mate shows you the, the dashboard. They say, no, look, I, I, I, I'm telling you, I withdrew some money. This works. Like, this is amazing. Get like, you know, that's how this works.

And I think we all know when things sound too good to be true, they usually are. But I guess there's a few interesting elements to this. I mean, one, obviously, crypto, if you're not familiar with it, you know that people are getting rich. You think, OK, maybe I can get on this bandwagon and make some money maybe these returns are not too good to be true in the crypto world maybe this is how it works um and then i guess the thing that's really struck me is this really took off throughout the pandemic so you had this you had this combination of people feeling financially precarious and at the same time stuck at home behind the computer screens

looking for a sense of community. And from what I can see, I mean, they really hammered home this hyper-community element and they had these daily Zoom meetings and people felt they were part of something. And I think that combination really sort of ticked a lot of boxes for people. The other thing too is, I mean, you mentioned these folks in Tuscany, right? But I mean, this was around the world. Oh, totally.

Yeah. I mean, it was huge in North America. Quite late in the piece, there was an investor warning in Quebec, but it was big in Europe. Yeah, this was rampant around the world and I've been surprised at how you can have such an enormous scheme go unchecked. We're talking about something that's clearly in excess of a couple of billion dollars. I don't know how big it got to and how large the losses are,

but we know from chain analysis that in 2022 it was $1.3 billion US. And I suspect that's probably the tip of the iceberg. I'm going to go. National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples,

I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. So there's a couple guys running these schemes. I want to talk about them in a bit. But you talked about uncovering the CEO of Hyperverse, the purported CEO of Hyperverse, I guess. This is a guy named Stephen Rhys-Lewis. Hello, everyone. This is Stephen Rhys-Lewis, CEO of Hyperverse. Since we celebrated our official... Let's start with, I guess, what the company was saying about him. How is he being put forward? So who's this guy, Stephen Rees-Lewis? Oh, that's a very good question. So Stephen Rees-Lewis was put up at the launch of Hyperverse in December 2021 as the chief executive of Hyperverse.

Ladies and gentlemen, Stephen is a proven business builder with extensive experience across emerging markets, new technologies and digital assets. As the CEO of HyperViz, he's determined to use new technologies to craft a new space for the community in a new metaverse universe. They sort of promoted Steven Rees-Lewis as this star of the fintech world. He was presented in the video launches, someone who had worked for Goldman Sachs. He'd sold a web development company to Adobe. He'd launched an IT startup firm. And the hypertech group apparently was so impressed with this guy that they decided they wanted him

to front Hyperverse. It sounds like there was something tweaking in you that made you think he wasn't real. What started raising flags for you? Well, there was just no record of this guy anywhere outside of Hyperverse material. You know, I checked the UK company's register. He had an English accent, so it seemed that he had come from the UK. There was no record of this guy in the UK. There was no record of any acquisition of a company owned by a Stephen Reevesese lewis in any

public sec filings of adobe did some basic journalistic legwork and contacted all of the companies and organizations that were cited and i was sort of just hanging on to hope that someone would work out who this guy was i was like i was convinced i was like this guy does not exist like it's not possible in the internet age to have a such a illustrious career in the fintech industry and yet have zero internet footprint i mean it's just it's just impossible but you know to be able to prove that is is difficult so once we published the story, I was delighted a US-based YouTuber actually used a face recognition software to track down this guy. Now, before I made this video, I wanted to be crystal clear that this was definitely our guy. I didn't want to shine a spotlight on an innocent man and end up ruining somebody's life.

So here's a couple of side-by-side pictures of our boy Steve-O and our fake CEO Steve Rhys-Lewis. And it's pretty obvious that we're talking about the same guy, but just in case you're still not totally convinced. And then we were able to speak to him and I was able to convince him to have a chat to us about how it was that he became the fake chief executive of this global multi-billion dollar crypto investment scheme, which is not something you stumble across every day. And he wasn't Stephen Rhys Lewis,

right? This is a guy named Stephen Harrison. So tell me about Stephen Harrison. What was he up to? Well, Stephen Harrison is a football commentator living in Thailand. He was absolutely aghast, he claims, when he read the story. And, you know, that was my initial contact with him. I sent him a link to the story being like, hey, dude, can we have a chat? And I think, you know, initially he was pretty spooked as you would be. But he eventually agreed to have a chat to us and i guess he wanted

to set the record straight the one he had absolutely no idea that they had put up these this fake cv about him um and he also had wanted to make clear that he hadn't pocketed any of the uh any of the money that had come into hyperverse in australian dollars he was paid about seven and a half grand over nine months and he got a free suit and a couple of shirts and ties so he was he was you know but he i mean it's a bit sus right like he knew that he was being put up as the chief executive but obviously he wasn't the chief executive but he claims that he was told that this was pretty normal in the crypto industry he rolled rolled with it because he says he didn't realize what he was getting himself involved in. And the sense you got from your conversation with him is that he's a guy who was just making, he's making a bit of cash doing this performance as a budding actor, but he wasn't involved.

That's right. He was keen to expand his repertoire. He was like, hey, what about, do you want to be a fake chief executive? He was like, yeah, okay, cool. I can do that. The other thing that I was, I think I read it twice too,

because like, what? So you've got a fake CEO and you found that out, but there were these celebrity endorsements. There was one from Chuck Norris. This is the dawn of a new beginning with a metaverse odyssey with endless possibilities. There was one from the Apple co-founder Steve Wozniak. Reimagine a virtual world open for exploration in any way you choose. Be a galaxy pioneer.

Go on intergalactic explorations. And those were real, right? Yeah. So, I mean, we're not 100% sure how these messages of support were obtained, and I've certainly tried through contacting them either directly or through their agents to try and get some clarification around this. But all four of these celebrities you can hire through the website Cameo where you can pay a high-profile individual to read out something.

You know, it could be a birthday message or a business marketing video. And so, you know, this is sort of going back to your question about how people were sucked into this. I mean, you know, like if you – Who's not going to buy Bitcoin from Chuck Lewis, right? Yeah. I mean, Steve Wozniak, he's made a lot of money. Like sign me up.

Right. To be clear, it's not suggested that these celebrities knew what they were promoting. Okay, so let's talk about, so that's the front. That's the fake leadership of Hyperverse. That's some of the hype that's going on around. But then there are these two real people, these two central characters who are actually behind the scheme. And this is two guys named Sam Lee and Ryan Ju. Can you start by telling me who Sam Lee is?

So Sam Lee was sort of a blockchain entrepreneur in Australia. And we're talking like he was a young guy, you know, we're talking about in his 20s, he set up the Blockchain Center in Melbourne, Australia. He was sort of at the forefront of this technology. He and Ryan Zhu set up the Bitcoin Group. They were keen to become the first blockchain company listed on the Australian Stock Exchange. That didn't happen. They did try to do that, but that didn't happen. He was sort of dubbed the crown prince of Bitcoin in Australia. Now, Sam Lee has sort of said he claims he wasn't involved in Hyperverse, even though Hypertech Group launched Hyperverse. It's a little bit difficult to get to the bottom

of the organisational structure. He claims he was involved in the funds management and technology side of the business but not the multi-level marketing side of the business. So he's sort of running away from this even though throughout Hyperfund and Hyperverse he and Ryan Zhu were sort of front and centre of the promotional material. And people who bought into this game believed that Sam Lee and Ryan Zhu were the

founders and were responsible for this game. Okay. And what about Ryan Zhu? He's a Chinese citizen. He completed a Bachelor of Engineering. He was a nuclear engineer in Beijing. He's one of china's four bitcoin kings he calls himself the martian um which is a bit weird um he's like the like someone from mars like from mars yeah because well he he says he gave himself this nickname because he felt like he didn't belong on earth so he's yeah it's it's kind of quirky. We don't know where Ryan Zhu is. So it's been very difficult, I guess, to, again, put questions to them to try and get a bit more clarity

and light about how this all worked and how it was structured. But both Zhu and Li were behind a company called Blockchain Global, which is an Australian company, and that company collapsed in 2021 and owes investors $58 million. Now, liquidators for that company have referred both Zhu and Li to ASIC, our corporate regulator in Australia, for alleged breaches of the Corporations Act. And just this week we reported that ASIC is now finally having a look at those allegations.

So I just want to break a couple things down here. So you said that Ryan Zhu, we're not sure where he is. Do we know where Sam Lee is? Sam Lee is in Dubai. He left for Dubai in late 2021. So about just before the collapse of Blockchain global and has been there ever since. He doesn't hide the fact that he's in Dubai. He has done countless Zoom meetings and he's also hosted many

of the sort of senior leadership of Hyperverse who've come to visit him in Dubai. His door is apparently always open. So have you had any contact with Sam Lee or Ranjit? I guess I'm curious what they say about these allegations. Yeah, look, Sam Lee has declined to answer a lot of detailed questions that the Guardian has sent to him for a response. He contacted me following the publication of the story to say that uh it was

full of misstatements but he has declined to sort of outline what they are and we've sent a range of follow-up questions offering him right to reply and to try to explain um his involvement in hyperverse and hyper nation and hyper fund um but he hasn't responded when asked, you know, detailed questions, and he also claims that people on the internet are making things up about him. And what about Ryan Zhu? Have you had any contact with him? No.

Has he said anything? No. I have tried to contact him. I've tried various means to contact him. He has a Hong Kong-listed phone number, but we've been unable to contact him. He has a Hong Kong listed phone number, but we've been unable to reach him for comment. So you talked about the fact that separately they kind of co-founded Blockchain Global, this company that fell apart.

They owe creditors almost $60 million. I guess I'm curious, when it comes back to the Hyperverse and associated things, have either of them been charged with anything in the Hyperverse universe? Have either of them been charged with anything in the Hyperverse universe? No. The first arrest for Hyperverse actually happened just a couple of weeks ago in the US with a senior promoter called Rodney Burton, who is known as Bitcoin Rodney. So he's the first person in this game to be charged with anything related to Hyperverse. I mean, I guess one of the things that has struck me about this is something like this that runs from the internet

is sort of it's kind of a very difficult space to police. And so I think there are some problems in terms of how these schemes present themselves as membership schemes and not investment schemes, which obviously, you know, it's a difficult area. And it's sort of shocking to me that these can run unchecked and, you know, we can be aware of them, but who's policing them? I don't have a clear answer to that question.

I want to end this by coming back to the folks who lost money. And it sounds like there were a lot. I mean, one thing that stood out, a a couple things that stood out was this claim that that lee made on one of the zoom calls that there were two million members in the hyper community and i know that's not something that was verifiable and then there was also kind of an audacious claim that he wanted to bring in like a billion people in three years all that to say a lot of people lost money and and i guess my my question is well you know what are the people who who lost money want going ahead like what what what's the hope for them

yeah look i mean i think people want some justice i think that's a natural human reaction to you know feeling that they have been ripped off there are still people who are hanging out, hope that they might get some money back. I think most people I've spoken to have given up on that notion and just want to see some sort of level of accountability for the people who ran the scheme. You know, people have been really rocked by this. You know, I've heard stories of people who, you know, lost their superannuation savings, lost money they'd set aside

for surgery, people whose livelihoods have really been shattered by this. You know, there's been claims of loss of life. There's been claims of, you know, people being completely broken. And, you know, one guy I spoke to in Australia, he brought 18 people into the scheme. He said 16 of those people don't talk to him anymore. You know, relationships and friendships have been severely tested when these things fall apart.

And that is, you know, I think it really has been like a wrecking ball for so many people. And so is, you know, I think it's really has been like a wrecking ball for so many people. And so people want justice. They really want someone to be held to account. Sarah, you've done amazing reporting and I really appreciate you coming on to tell us about it. It's been my pleasure. Thank you for having me. All right, that's it for today. I'm Damon Fairless. Thanks for listening to FrontBurner.

I'll talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.