Founder of Cryptocurrency Hedge Funds Pleads Guilty to Securities Fraud
Stefan He Qin, a 24-year-old Australian national and the founder of two cryptocurrency hedge funds, has recently pleaded guilty to securities fraud. Qin, who launched Virgil Sigma and VQR in New York between 2017 and February 2020, is accused of defrauding investors out of almost $100 million.
Details of the Fraudulent Scheme
Virgil Sigma claimed to profit from an algorithm that exploited market price differences between digital currencies, while VQR utilized various trading strategies. Together, the funds managed to amass over $114 million from numerous investors.
However, it was revealed that Qin had been embezzling funds from Virgil Sigma since 2017, using the money for personal investments in other cryptocurrencies and real estate, including renting a penthouse apartment in New York. The Department of Justice stated that Qin deceived investors by providing false account statements, “tear sheets,” and K-1 tax forms.
Despite his fraudulent activities, Virgil Sigma continued to attract new investors and was even featured in the Wall Street Journal in 2018, further increasing Qin’s pool of victims.
The Unraveling of the Scheme
By the summer of 2020, Qin’s fraudulent activities began to catch up with him. He resorted to using funds from VQR to pay off investors in Virgil Sigma who wanted to withdraw their investments. Qin also convinced some Virgil Sigma investors to reinvest their funds into VQR, even though there was no actual money left to transfer.
Ultimately, investors were defrauded of nearly $100 million by Qin. His sentencing is scheduled for May 20, 2021, with the maximum penalty for securities fraud being 20 years in prison.
Rising Trend of Cryptocurrency Fraud
Instances of cryptocurrency fraud schemes, such as the one orchestrated by Stefan He Qin, are becoming more prevalent as fraudsters seek to exploit the popularity of digital currencies. Just last week, another individual was charged with securities fraud for allegedly swindling investors out of $11 million in a scheme that involved using actor Steven Seagal to promote a fake company.