September 16, 2021

US court sentences crypto fund founder to seven years in prison

US court sentences crypto fund founder to seven years in prison

The founder of New York-based hedge funds Virgil Sigma and VQR Multistrategy, Stephan Qin, has been sentenced to seven and a half years in prison. Prosecutors allege he stole more than $54m from investors.

Qin promised high returns to his clients, claiming that he used an algorithmic trading method of his own design to profit from the price differences of a number of cryptocurrencies. According to the US DOJ, Virgil Sigma had more than $90 million in assets under management, and the entity's marketing materials stated that it had been profitable from August 2016 to the present (excluding March 2017).

In reality, however, Virgil Sigma was unprofitable and Qin was spending investor funds on personal needs. For example, he invested in high-risk ventures, including ICOs, and rented himself a $23,000-a-month penthouse.

I thought life was a video game and I was its protagonist. It was as if I had found a cheat code that allowed me to win. But as we know, life is not a game, Bloomberg quoted Qin as saying.

At the end of 2020, as losses mounted, investors began demanding their money back. To pay them back, Qin tried to extract funds from another controlled entity, VQR Multistrategy. He also planned to withdraw almost $2 million of client assets to pay off Chinese moneylenders from whom he had borrowed.

After numerous investor complaints, the US Securities and Exchange Commission (SEC) secured an asset freeze for the management company Virgil Capital, which the regulator accused of securities fraud.

In February 2021, Qin pleaded guilty - he faced up to 20 years in prison. As the manager voluntarily surrendered to the authorities and helped recover some of the money lost by investors, Judge Valerie Caproni issued a more lenient ruling.

We shall remind you that Michael Ackerman, the head of Q3 Trading Club, confessed to a $30m cryptocurrency fraud.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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