Defrauded more than 100 investors with cryptocurrency fund and won 7 years in jail

Key facts

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  • More than a hundred Americans believed they were investing safely, but were scammed.

  • The head of the fund pretended to be a huge success and claimed they were the biggest of them all.

Stefan Qin, founder of cryptocurrency hedge fund Virgil Capital, was sentenced to seven years in prison this September 15, six months after pleading guilty to fraud.

Qin founded the Virgil Sigma fund in 2016 when he was just 19 years old. Since then, the fund defrauded more than 100 investors into believing their money was used solely for cryptocurrency trading, through trades based on its proprietary algorithm that it presented as “market neutral.”

The company lured investors with big promises, but in reality, Qin and affiliates of Virgil Capital took almost all of the cryptoassets deposited in the fund. These assets were valued at about USD 90 million, as revealed by the release

from the U.S. Attorney’s Office for the Southern District of New York in the United States.

Qin used the money from the funds to make unauthorized investments and also used a portion for personal expenses, such as paying rent on a penthouse apartment in New York City and buying groceries. He also made personal investments, “often illiquid and in other entities that have nothing to do with cryptocurrencies,” the statement details.

The cryptocurrency hedge funds operated by Qin, Virgil Sigma and VQR, the latter of which was founded last year, used a marketing strategy to hide the scam. They claimed the company had been profitable from August 2016, to the present, with the sole exception of March 2017, the document adds.

In or around 2018, Qin invested hundreds of thousands of dollars stolen from Virgil Sigma in a real estate investment and used a substantial portion of Virgil Sigma’s capital to invest in cryptoassets that had nothing to do with the fund’s stated arbitrage strategy.

Release from the U.S. Attorney’s Office for the Southern District of New York. Defrauded more than 100 investors with cryptocurrency fund and won 7 years in jail Defrauded more than 100 investors with cryptocurrency fund and won 7 years in jail The fund manager misled his victims with false profitability postings. Source: YouTube screenshot.

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The document then clarifies that the Virgil Sigma and VQR funds have ceased operations and the liquidation and distribution of their assets are handled by a court-appointed trustee in charge of the matter.

As CryptoNews reported at the time, the U.S. Securities and Exchange Commission has issued a statement saying that the funds have ceased to operate.

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Virgil Capital, Qin and affiliated companies in the Southern District of New York on December 22, 2020.

The scam was allegedly uncovered when Qin attempted to move cryptoassets from one fund to another to cover refund requests by several investors. Qin allegedly convinced at least nine investors, whose interests totaled $3.5 million, to “transfer” their investments from the Sigma Fund to the VQR Fund.

The SEC’s complaint cited an article in which Qin stated that the “Sigma Fund has $112 million in assets.” According to Qin’s statements, the fund “is under his management” and claimed that they were “the largest, or one of the largest cryptocurrency funds.”