coincodex.com
Key highlights:
- Australian national Stefan He Qin, who founded two crypto hedge funds in the U.S., has been sentenced to 7 and a half years in jail
- According to the U.S. DoJ, Qin used investors money for personal expenditures
- Qin also allegedly took funds from one fund to pay the investors of another
Crypto hedge fund manager gets 7 and a half year prison sentence
Australian national Stefan He Qin, who founded two U.S.-based cryptocurrency hedge funds, has been sentenced to seven and a half years in prison after pleading guilty to securities fraud.
Qin’s hedge funds were called Virgil Sigma and VQR – the former claimed to make its profits through a market-neutral strategy by taking advantage of arbitrage opportunities on different cryptocurrency exchanges, while the latter employed a more standard approach of trading cryptocurrencies to profit from their price fluctuations. The Virgil Sigma claimed that it turned a profit in every month of its operation, except for March 2017, when it supposedly recorded a loss.
Qin’s hedge funds managed to attract over $90 million in investments, and he was also featured in high-profile media outlets such as the Wall Street Journal and CNBC.
As it turns out, Qin’s success story turned out too good to be true. According to the U.S. Justice Department, Qin was embezzling investor funds from Virgil Sigma and using them to fund personal expenses such as food and rent for a New York City penthouse apartment.
In addition, he used money from the fund to make personal investments, which were completely unrelated to the Virgil Sigma fund’s stated investment strategy. This included investment in real estate and various crypto assets, including ICOs. Per the DoJ, Qin misappropriated almost all the money that was invested in the fund:
“As a result of these and other fraudulent activities, QIN dissipated nearly all of the investor capital in Virgil Sigma. QIN also regularly lied to the fund’s investors about the value, location, and status of their investment capital, including through false account statements that QIN prepared and bogus tax documents that he circulated to his investors.”
The DoJ says that in December 2020, Qin ordered the head trader of the VQR fund to close the fund’s trading positions and transfer a portion of the fund’s money to him, so that he could pay off Virgil Sigma investors who were looking to get their money out.
In addition to a seven and a half year federal prison sentence, Qin has also been sentenced to three years of supervised release and must forfeit almost $54.8 million.