Stefan Qin, founder of the New York hedge funds Virgil Sigma and VQR Multistrategy, sentenced to seven and a half years in prison. Prosecutors allege that he defrauded investors of more than $54 million.
Qin promised his clients high returns, claiming to use an algorithmic trading method of his own design to profit from price differences across a range of cryptocurrencies. According to the U.S. Department of Justice, assets under Virgil Sigma amounted to more than $90 million, and marketing materials for the outfit stated that it had been profitable from August 2016 to the present (except March 2017).
However, Virgil Sigma was, in fact, unprofitable, and Qin spent investors’ funds on personal use. For example, he invested money in high-risk ventures, including ICO, and rented himself a penthouse costing $23,000 a month.
“I thought life was a video game, and I was its main character. I seemed to have found a cheat code that would let me win. But as we know, life is not a game,” Qin is quoted by Bloomberg.
At the end of 2020, as losses mounted, investors began demanding their money back. To meet these demands, Qin attempted to extract funds from another affiliated structure — VQR Multistrategy. He also planned to withdraw almost $2 million of client assets to repay Chinese lenders from whom he had borrowed.
After numerous investor complaints, the U.S. Securities and Exchange Commission (SEC) obtained asset freezes on Virgil Capital, the management company, which regulators accused of securities fraud.
In February 2021, Qin pleaded guilty — facing up to 20 years in prison. Because the manager voluntarily surrendered to authorities and helped recover a portion of the investors’ losses, Judge Valerie Caproni handed down a lighter sentence.
Earlier, Michael Ackerman, head of Q3 Trading Club, admitted to cryptocurrency fraud amounting to $30 million.
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