Notable litigation filed during January 2024 includes: (1) Bajuri v. Shiba Prop, LLC, et al. and (2) SEC v. Lee, et al.

Bajuri v. Shiba Prop, LLC, et al., No. 24-cv-00419 (Kan. Dist. Ct.).

A Ponzi victim filed suit against defendant schemers in the District Court of Johnson County, Kansas for losses arising from an alleged Ponzi scheme in which individuals were solicited to invest in limited liability companies for the purpose of purchasing real estate. The complaint alleges that defendants set up LLCs for the purpose of purchasing individual real estate investments, and defendants would create multiple operating agreements for each company to sell far more than 100% of the interests in the companies to investors. Plaintiff alleges that defendants used investor funds to liquidate certain of its real estate assets, among other things, through cash-out refinancing with the loan proceeds going to fund defendants’ personal expenses like cars and jewelry. Plaintiff alleges that several of the properties that were part of defendants’ Ponzi scheme were foreclosed on by their lenders, leaving the limited liability companies with insufficient assets to pay its debts to investors. Plaintiff seeks recovery under the Kansas Uniform Fraudulent Transfer Act.

SEC v. Lee, et al., No. 24-cv-00296 (D. Md.).

The SEC filed suit against defendant schemers in the United States District Court for the District of Maryland for losses arising out of an alleged global, crypto asset-related, multi-level marketing Ponzi scheme run through a series of projects referred to collectively as HyperFund, a project dedicated to creating a decentralized finance (DeFi) ecosystem for crypto asset market participants. The complaint alleges defendants, the founders and promoters of HyperFund, offered membership packages promising exorbitant passive returns supposedly derived in part from HyperFund’s crypto asset mining operations and implemented a pyramid scheme-like referral system to reward existing members for recruiting new investors. The SEC alleges HyperFund had no real source of revenue other than funds received from investors, defendants had no basis for the promised returns, and despite defendants’ claims, HyperFund did not engage in large-scale crypto asset mining.  The complaint alleges with no apparent legitimate source of revenues, investor withdrawals were paid with new investor deposits. The SEC alleges violations of the Securities Act and Securities Exchange Act, permanent injunctive relief against defendants to prevent future violations of the federal securities laws, disgorgement of ill-gotten gains, and civil penalties.