Crypto hedge fund founder defrauded investors $54 million with phony investment strategy
Stefan He Qin, the 24-year-old founder of two New York-based cryptocurrency hedge funds, has pleaded guilty to securities fraud and was sentenced to seven and a half years in prison and fined $54 million.
- Stefan He Qin pleaded guilty to operating a $100 million Ponzi scheme that defrauded investors of over $54 million.
- Qin launched a crypto hedge fund called Virgil Sigma that promised investors 500 percent annual returns through a “safe” investment strategy
- The defendant created false account statements and phony tax paperwork to deceive investors into believing the company was profitable
The 24-year-old college dropout was sentenced to 90 months in prison and ordered to forfeit $54 million on Thursday after pleading guilty to securities fraud, according to a DOJ press release. Qin ran two New York-based cryptocurrency hedge funds worth over $100 million with assets under management.
In 2016, Qin launched a crypto hedge fund called Virgil Sigma. The investment promised investors 500 percent annual returns through a “market neutral” and “safe” investment strategy that purported to take advantage of arbitrage opportunities across multiple platforms.
During the first year of operations, the Qin money fund amassed $23.5 million in assets under management, prompting him to be featured in the Wall Street Journal. By 2020, owing to his fame, the Virgil funds had raised almost $90 million, inspiring the con artist to establish a second firm named VQR with an additional $24 million in assets under management.
The Department of Justice (DOJ) said that since 2017, Qin had operated a scheme to steal assets from Virgil Sigma and defraud investors.Qin deceived his investors by pocketing their cash and squandering it on personal expenditures such as food, services, and rent for a $23,000-a-month Manhattan apartment. Qin also invested the fund’s money in personal ventures in real estate and initial coin offerings (ICO).
Qin’s extravagant spending exhausted all of Virgil Sigma’s cash. “Qin’s investors soon discovered that his strategies weren’t much more than a disguised means for him to embezzle and make unauthorized investments with client funds,” said Manhattan US Attorney Audrey Strauss in a statement.
After failing to fulfill redemption requests, Qin sought to steal assets from his second fund, VQR, in order to hide his tracks. Speaking before the judge, Qin said:
“Instead of coming clean I did the worst thing and doubled down on my lies… I thought I was the main protagonist and life was a video game and I had just found the cheat code to beat it. As we know, life is not a video game.”
The defendant created false account statements and phony tax paperwork to deceive investors into believing the company was profitable every month from August 2016 except for March 2017, according to authorities.
The two investment offerings were created at the height of the first Bitcoin bull run, which saw the asset attain an all-time high of $20,000 in December 2017.
In February this year, facing 20 years in prison, Qin turned himself in to the FBI and pleaded guilty on the same day. On account of his spotless record and voluntary return, he was sentenced to seven years and six months imprisonment and ordered to forfeit $54 million stolen from customers.