(This article is available by subscription only so I copied and pasted it below.)
https://www.nytimes.com/2022/11/11/business/crypto-ponzi-scheme-hyperfund.html
Here's part of the information about Mr. de Hek's past as a JW:
... To understand that passion, and his mission to wipe out crypto Ponzi schemes, you need to know something about Mr. de Hek’s childhood. Like everyone in his family, he was raised as a Jehovah’s Witness.
"From the age of 5, I was knocking on the doors of strangers, telling them that fires and earthquakes were happening for a reason, that the world was ending soon,” he recalled, describing being taught that only believers will survive the imminent destruction of earth."
The Crypto Ponzi Scheme Avenger
From his home in New Zealand, the
YouTuber Danny de Hek assails what he calls a dangerous and deceptive scheme,
one rant at a time.
By David
Segal
Nov. 11, 2022
Last
year, Danny de Hek was a social media guru badly in need of a social media
guru. A buoyant New Zealander with geeky glasses, he dispensed advice about how
to vastly expand your online audience, to a group of just 350 subscribers.
He
earned a living by drop-shipping electronics as he searched for ways to make
serious money. Then, in February, the husband of a friend sent the 52-year-old
Mr. de Hek an email crowing about a company that somehow guaranteed outsize and
clockwork returns. Investors in what was then known as HyperFund — it has since
been rebranded twice — could triple their money in 600 days.
“It’s
the best passive income retirement plan I have ever seen,” the acquaintance
wrote. Get in now then sit back and watch the cash roll in.
The message changed Mr. de Hek’s
life, though not in the way his friend might have hoped. After a few days of
looking into HyperFund, Mr. de Hek concluded it was a scam, one that he estimates
has attracted at least $1 billion by recruiting thousands of participants, some
of whom put up as little as $300 or as much as $50,000 or more.
By
March, he had crafted a new online identity: crypto Ponzi scheme buster. Mr. de Hek has since
denounced HyperFund in more than 130 videos posted to YouTube, some of them
nearly two hours long, lecturing viewers in a style that toggles between
goofball and scold.
“When
I looked into HyperFund, to me it just seemed black and white,” Mr. de Hek said
during one of several interviews from his home in Christchurch. “Then I
thought, I need to warn people about this.”
Mr.
de Hek is one of the few voices flagging crypto-based Ponzi schemes, which U.S.
investigators say are a severely underpublicized scourge. The past week has
shown just how volatile the market is: One of the largest cryptocurrency
exchanges in the world, FTX, collapsed and the
industry, is in meltdown.
Amid that kind of uncertainty, many
investors have decided that if their tokens won’t recover from the steep drop
in value that began last November, why not take a flier on a company that
sounds crypto-adjacent?
“People are desperate, and out of
desperation they’re giving it a go,” Mr. de Hek said. “It’s depressing because
this is often a last-ditch effort.”
Mr. de Hek has denounced
HyperFund in more than 130 YouTube videos from his home in New Zealand. Credit...Tatsiana Chypsanava for The New York Times
A
Ponzi scheme, for those in need of a refresher, is an age-old fraud in which
inflows of new money pay off earlier investors. Using cryptocurrencies does
little more than lend the whole plate-spinning contraption a patina of the
cutting edge — Hey, it’s on the blockchain —
and makes it harder to pin down who is in charge. But the story ends the same
way: champagne for those at the top, tears for everyone else.
U.S.
investigators have busted a handful of crypto Ponzis over the years. Among them
is OneCoin, which was based in Bulgaria and which prosecutors allege brought in
roughly $4 billion from investors around the world. The charismatic co-founder
of that fraud, Ruja Ignatova, disappeared after the fund closed in 2017 and is
the subject of an 11-part BBC podcast, “The Missing Cryptoqueen.”
“We’ve
worked multiple cases that involve more than $1 billion, and those are only the
ones we hear about,” said Jarod Koopman, the acting executive director of the
Cyber and Forensic Services section of the Internal Revenue Service, which
spearheads crypto-Ponzi investigations, in a phone interview. “These are
traditional Ponzi schemes that have been adapted to the digital landscape,
recruiting investors through social media to make them look great. And they’re
completely bogus.”
Mr.
Koopman would not comment on cases other than those that are already public,
and he declined to discuss HyperFund. The company has attracted the attention
of regulators in Britain, where the Financial Conduct Authority has a webpage warning investors to
“be wary of dealing with this unauthorized firm.”
Dozens of HyperFund investors have
left withering takedowns on the company review site Trustpilot. One person who
said he had lost $10,000 wrote, “For the love of God — stay away from this
scam.” A Facebook page called “HyperVerse Scam — Now What!?” has 6,200 members.
“So
that’s my money gone,” read the top comment in mid-October. “Lesson learned.”
To
Mr. de Hek, everything about the Hyper empire seems suspicious. On its website
and in promotional videos, HyperFund explained that investors could buy
“memberships,” starting at $300, and earn “rewards” that would accrue daily in
their account. Those rewards took the form of “HU,” the internal trading
currency, said to have parity with the U.S. dollar.
And
why would everyone’s HU triple in 600 days? Because the putative founders of
HyperFund — Ryan Xu and Sam Lee, described on promotional sites as a pair of
superstar blockchain entrepreneurs — were going to pour all that cash into
promising and profitable crypto projects, which they claimed would eventually
serve 30 million customers. They also said the company would go public on the
Hong Kong Stock Exchange.
It
sounded plausible to many. Whoever ran HyperFund exploited the craze for
crypto, which to most people at the time was a bafflingly complex technology
that seemed to mint millionaires. But HyperFund never went public, and the only
product it sold was memberships to HyperFund. Members who recruited new members
got a cut of their recruits’ rewards, a perennial feature of pyramid schemes, and an occasional feature of Ponzi's.
To
Mr. de Hek, this sale of memberships, in the absence of any product, was a
blazing red flag that he had seen all too often. Before the pandemic, he had
created Elite: Six, a company that hosted twice-a-week, in-person networking
meetings for small-business owners in Christchurch. Those who paid $60 a month
could introduce themselves and pitch their company. Mr. de Hek vetted every
pitch, and in more than a few cases the main product was a joining fee, which
earned the right to recruit others and get a cut of their joining fee. And so
on.
“They
were basically multilevel marketing companies,” Mr. de Hek said. “I hate them
with a passion. I never let them in.”
To
understand that passion, and his mission to wipe out crypto Ponzi schemes, you
need to know something about Mr. de Hek’s childhood. Like everyone in his
family, he was raised as a Jehovah’s Witness.
“From the age of 5, I was knocking
on the doors of strangers, telling them that fires and earthquakes were
happening for a reason, that the world was ending soon,” he recalled,
describing being taught that only believers will survive the imminent
destruction of the earth.
He
eventually started questioning some of his beliefs, and at 23, when he
confessed to a romantic fling — premarital sex was forbidden — church elders
“disfellowshipped” him, as ex-communication is called.
Only
later did Mr. de Hek conclude that he had been raised in a cult. (The church
disagrees. “No, Jehovah’s Witnesses are not a cult” is an answer to a
frequently asked question on its website. “Rather, we are Christians who do our
best to follow the example set by Jesus Christ and to live by his teachings.”)
To Mr. de Hek, the way that
HyperFund investors talked about the company, in chats, and on YouTube videos,
was an eerie echo of what he had experienced as a child.
“Everyone
in the Jehovah’s Witnesses loves other members, and it’s that sense of
community that is the most precious thing to them,” he said. “Everyone in those
HyperNation Zoom chats keeps talking about how much they love each other. And
in both cases, there is no talking anyone out of their faith. For the
Witnesses, it’s faith in the Bible and in end times. For HyperNation, it’s
faith in the blockchain.”
Since
the end of last year, the HyperFund faithful have been severely tested. In
December, the company rechristened itself HyperVerse, an apparent attempt to
cash in on the vogue surrounding all things metaverse. (“Open a space factory,”
it says in the Galaxy Pioneer section of the HyperVerse home page.) The
internal currency was changed, too; everyone’s HU was suddenly called HV.
The new packaging didn’t solve a
larger problem. Last November, Bitcoin began an epic decline, from about
$64,000 apiece to roughly $16,000 today. Thousands of other coins are down 95
percent or more. With a crypto winter underway, it seemed impossible for
HyperFund or its successors to keep paying rewards if they were truly the
fruits of crypto-related investments.
By
late last year, members had started to howl online that they could not withdraw
their rewards. One of them was Mike Lucas, 61, who lives in Paterson, N.J., and
spent much of his working life in the shipping department of A.&P.
supermarkets. He was introduced to HyperFund through a friend of a friend.
“He’d
invested in it, and he said, ‘Give it a try,’” Mr. Lucas said in an interview.
“He showed me this chart of how much I’d earn in 600 days if I invested
$50,000. Then I looked into Ryan and Sam, and they were real people who did
crypto stuff.”
Last
year, Mr. Lucas put $25,000 into HyperFund, all of it from an individual
retirement account. A few months ago, when he tried to make his first
withdrawal, nothing budged. At first, he thought it was a technical problem —
the instructions are fantastically complicated. At some point, he realized that
his money was gone.
“I
was hoping to use it to spend more time somewhere warmer, rent a place south,
maybe North Carolina,” Mr. Lucas said. “Those plans are on hold, and I’m furious.
At a loss for words.”
Over
the summer, as the anger mounted, HyperVerse pivoted yet again and became
HyperNation. Again, the rules changed. Members could transfer their rewards to
the new platform only if they bought one of several bespoke nonfungible tokens,
or NFTs, such as a “purple box,” which cost $10,000. Large returns were once
again promised.
In his videos, Mr. de Hek treats all
of these and other twists in the Hyper plot with a light touch, one befitting a
farce. That’s especially true when the topic is Mr. H, a figure who now appears
on HyperNation videos as some kind of spokesman, wearing a gold mask and a
black hoodie and uttering slogans —
“HyperNation will be an equal, fair and transparent platform that can solve the
pain points of today’s society” — in a variety of slick studio settings. It’s
like getting lectured about utopia by a character in “Squid Game.”
Who
is actually running HyperNation is a mystery that Mr. de Hek continues to
plumb. In September, a man with a British accent named Keith Williams announced
in a Zoom call of HyperNation elite — an insider sent Mr. de Hek a link to the
recording — that he had been named “by corporate” as the global head of sales.
He didn’t identify anyone in corporate, and Mr. de Hek has theorized that Mr.
Williams is now in charge.
“Keith
Williams has put his neck on the chopping block,” Mr. de Hek said in an
interview. “Regulators will be looking for him.”
Mr.
Williams could not be reached for comment through his LinkedIn page, Facebook
account, or phone numbers in online databases associated with him. He did not
respond to emails sent to Future in Safe Hands, a personal coaching company
where he is a director, according to Companies House, the British government’s
business registrar. One recent evening, a woman at a residence that Companies
House listed as Mr. William's address, in a London suburb, said he was not home
and offered to pass along a reporter’s business card.
In
a recent HyperNation video, Mr. Williams described Mr. de Hek as a guy in a
cheap suit looking to pay the rent through a YouTube audience.
Mr.
de Hek’s suit is cheap, he says. But with a
mere 2,500 subscribers, his YouTube audience remains tiny, and so far his
labors on that platform have yielded a total of $1,200, after taxes, which
works out to pennies per hour.
Without
that drop-shipping business, he’d struggle. This doesn’t seem to bother him, in
part because he is a born optimist and thinks this online scam-busting thing
could one day catch on. Viewers have sent him dozens of links to likely online
Ponzi schemes, and he plans to name and shame them all. If that creates
enemies, fine.
“I’ve already had my life
threatened,” Mr. de Hek said, with a smile. “My saving grace is that I live in
New Zealand. I’m a long way from everyone.”
https://www.nytimes.com/2022/11/11/business/crypto-ponzi-scheme-hyperfund.html
Credit...Tatsiana Chypsanava
for The New York Times
