Australian pleads guilty to $90 million cryptocurrency scam

The U.S. prosecutors charged 24-year-old Australian citizen Stefan He Qing with fraud in managing the New York-registered cryptocurrency hedge fund Virgil Sigma. The defendant pleaded guilty to misappropriating $90 million during the proceedings.

According to law enforcement, He Qing committed the offense from 2017 to 2020.

“The defendant diverted nearly all of the fund’s assets … and spent them on ‘extravagances’ and personal speculative investments. He lied to investors about the fund’s performance and the fate of their assets, fabricating materials,” the statement said.

To satisfy Virgil Sigma’s clients’ demands, He Qing tried to use funds from another crypto hedge fund he opened in February 2020, VQR Multistrategy, with $24 million under management.

The hapless manager faces up to 20 years in prison. Sentencing in the in the federal court of the Southern District of New York is expected on May 20.

The investigation was conducted by a special task force from the Securities and Commodities Fraud Division of the National Security Ministry (MNB) with the involvement of the Securities and Exchange Commission.

According to MNB special agent Peter Fitzhugh, He Qing used the two funds as a “slush fund” for an extravagant lifestyle. His sophisticated deception allowed him to dupe investors who fell for the promise of high returns of nearly $100 million.

Virgil Sigma was marketed as a fund that exploits market-arbitrage opportunities. The trading algorithm sought price discrepancies across 40 different platforms. He Qing spoke in detail about the operation of the “market-neutral strategy” in an interview with the Wall Street Journal. Marketing materials indicate monthly profitability since August 2016, with the exception of March 2017.

Earlier in January, a San Francisco resident was sentenced to six months’ imprisonment and ordered to pay $4.4 million for deceiving ICO investors.

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