Stefan He Qin, the founder of two cryptocurrency hedge funds, was sentenced to more than seven years in prison after U.S. authorities found he cheated on investors out of $ 54 million.
A September 15 statement by the US Department of Justice (DoJ) announced that US District Judge Valerie Caproni had sentenced Qin to 90 months for cheating on investors out of $ 54 million.
The 24-year-old Australian owned and operated two cryptocurrency mutual funds – Virgil Sigma and VQR, between 2017 and 2020, the latter of which was founded in February 2020.
Although Virgil Sigma claimed to be investing his clients’ assets in cryptocurrency arbitrage strategies, the DoJ found that Qin had been misappropriating investor capital from the fund since 2017 to pay for personal expenses such as groceries, rent and private investments.
In order not to arouse suspicion among its investors, Qin created fake bank statements and falsified tax documents claiming the company had been profitable for every single month since August 2016 except March 2017.
After Qin routinely lied to clients about the “value, location, and status of their investment capital” – with Sigma claiming assets of $ 90 million despite Qin “wasting almost all of the investors’ capital” – Qin attempted to acquire assets from VQR to steal redemption requests from Sigma’s investors.
In December 2020, Qin ordered VQR’s chief trader to reduce all positions in the fund and transfer the funds to the Australian. Despite warnings that the move would cause losses for VQR’s investors, the main trader replaced VQR’s positions and passed the funds on to Qin.
On February 4, 2021, Qin pleaded guilty to securities fraud. In the recent DoJ announcement, US attorney Audrey Strauss said:
“Qin’s brazen and far-reaching plans abandoned his beleaguered investors for over $ 54 million and he has now been sentenced to a reasonably long prison term of over seven years in federal prison.”
Qin was also ordered to withhold over $ 54 million and sentenced to three years of supervised release.
Related: Ohio man pleads guilty of $ 30 million crypto scam that promises 15% monthly
Regulators around the world recently pointed to the increasing prevalence of crypto fraud, with SEC chief Gary Gensler highlighting how loopholes in regulatory protections can put consumers at risk earlier this month.
“Investors may be less skeptical about investments that are new or ‘avant-garde’, or they can get caught up in the fear of missing out (FOMO),” warned Gensler.
In May, the Federal Trade Commission reported more than $ 80 million in consumer losses to cryptocurrency investment fraud since October 2020.