The speedskater, whose maiden name was Richardson when she grew up in High Point, posted a time of 38.14 seconds.
Lee finished at 37.33 whilst Nao Kodaira won the gold with an Olympic record of 36.94 in the 500m race.The athlete holds the world record of 36.36 seconds in the 500m race, now surpassed by Kodaira.
Defending champion Lee Sang-hwa of South Korea settled for silver, while Karolina Erbanova of the Czech Republic won the bronze medal.
"Nao said: "Next Olympics you can win and I'll take second place".
"She raced after I had finished and I told her how well she had done and how much I still respect her".
Kodaira was timed in 36.94 seconds, becoming the first woman to race under 37 seconds at sea level. The old record of 1:13.83 was set by American Chris Witty in 2002.
Norway lead the medal table, with 11 golds, while - despite Kodaira's success against Lee - South Korea lead Japan by three gold medals to two in the race to be the best in Asia.
No medal for Lindsey Vonn in the super-G
Vonn hit back at Trump supporters on Twitter Saturday after they expressed excitement over the Olympian falling during her race. Everyone was watching Vonn at the beginning because she was the first racer out of the gate on a sunny day with nary a cloud.
At 31, Kodaira is the oldest Japanese gold medalist in the Winter Games, breaking the record set by ski jumper Masahiko Harada who was 29 when he won the men's team event in 1998.
The sprinter now holds the world record of 36.36 set in 2013. Women's speedskating continues with the team pursuit qualifications on early Monday morning, the team pursuit medal event on Wednesday and the mass start, a new event, the following and final weekend.
Masahiro Yuki, who has coached Kodaira since she was a student at Shinshu University, focused not only on her skating technique and form, but also on how she used her body and the movement of her muscles. Accordingly, the two-time champion said if she really continues skating after PyeongChang, she will seek to fully enjoy competitions without pressure. She wasn't a natural on the ice, however.
The race was the first speed-skating event at the Oval in which no Dutch skaters finished on the podium.
Kodaira embraced her and made sure she was fine. She charged across the finish line, the gold medal easily in hand.
In 2015, she married Dutch speedskater Jorrit Bergsma and moved to the Netherlands to live with him. It was like a present for me, and my eyes were filled with tears.
The 500-meter speedskating race is over in a flash, so even the slightest slip can mean the difference between a gold medal and being far back in the pack. "I think that also helped me to earn silver", she said.