New York District Attorney Audrey Strauss announced that STEFAN HE QIN, the founder of the Virgil Sigma Fund LP (“Virgil Sigma”) and the VQR Multistrategy Fund LP (“VQR”), a pair of cryptocurrencies New York coverage claiming to have more than $ 100 million in investments was sentenced today to 90 months in prison. On February 4, 2021, QIN pleaded guilty to a felony of securities fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.
U.S. attorney Audrey Strauss said, “According to Stefan He Qin, founder of Virgil Sigma and VQR, a pair of cryptocurrency hedge funds in New York, Virgil had a market strategy declared ‘market neutral.’ . safe-deposit box investments. Qin investors soon discovered that theirs strategies they were nothing more than a disguised means of embezzling and making unauthorized investments with client funds. Faced with redemption requests that he was unable to comply with, Qin doubled his plan by trying to plunder VQR funds to meet the demands of his victim investors. Qin’s blatant and broad scheme left his besieged investors with more than $ 54 million, and he has now been given the long sentence of more than seven years in federal prison. ”
According to information and statements made in a public court:
Background
STEFAN HE QIN is a 24 year old Australian national. Between 2017 and 2020, QIN owned and controlled two cryptocurrency investment funds, Virgil Sigma and VQR, both located in New York City, New York. Since its inception, Virgil Sigma has sought to employ a strategy to profit from arbitrage opportunities in the cryptocurrency market. This strategy was promoted by QIN to the investing public as “market neutral”, i.e. the fund was not exposed to any risk arising from the price of the cryptocurrency going up or down and therefore provided a relatively investment safe and liquid. Until recently, Virgil Sigma was intended to have more than $ 90 million managed by dozens of investors, including many in the United States. According to its public marketing materials, Virgil Sigma has been profitable every month from August 2016 to the present, with the sole exception of March 2017. QIN also regularly participated in calls with Virgil Sigma investors and in other forms of public communication growth and success of Virgil Sigma. For example, in February 2018, QIN and its fund were profiled in the Wall Street Journal.
In approximately February 2020, QIN founded VQR. VQR used various trading strategies and was willing to make or lose money depending on the fluctuations in the value of the cryptocurrency and was not neutral in the market. QIN was the sole owner of the general partner of VQR, but did not participate in the day-to-day operations of VQR. Instead, VQR had its own sales staff, including a lead operator (the “lead operator”) and other investment professionals. Until recently, VQR had at least about $ 24 million under investor management.
Qin scheme to steal Virgil Sigma assets
Since 2017, QIN participated in a plan to steal assets from Virgil Sigma and deceive its investors. Instead of investing the fund’s assets in a cryptocurrency arbitrage trading strategy as announced, QIN misappropriated the capital of Virgil Sigma’s investors and used the funds for purposes other than the alleged trading strategy. of arbitration, including: (a) using a substantial portion of the capital of investors stolen from Virgil Sigma will pay for personal expenses such as food, services and renting a penthouse in New York City; (b) use a significant portion of Virgil Sigma’s investor capital to make personal, often illicit, investments in other entities that had nothing to do with cryptocurrencies. For example, in approximately October 2018, QIN invested hundreds of thousands of stolen dollars in Virgil Sigma in a real estate investment; and (c) use a significant portion of Virgil Sigma’s investment capital to invest in cryptographic assets that had nothing to do with the fund’s arbitrage strategy. For example, in 2018 or so, QIN invested Virgil Sigma funds in certain initial currency offerings, a speculative way to invest in new cryptocurrency numbers. As a result of these and other fraudulent activities, QIN dissipated almost all of Virgil Sigma’s investor capital. QIN also regularly lied to fund investors about the value, location and status of its investment capital, even through false statements of accounts that QIN prepared and false tax documents that it distributed to its investors.
Qin attempts to steal VQR assets to pay Virgil Sigma Investors
In December 2020, approximately, in the face of refund requests from the Virgil Sigma fund that he could not satisfy, QIN required VQR’s Head Trader to cancel all VQR trading positions and transfer a portion of the funds to QIN so that QIN could use that money to pay these amortizations to Virgil Sigma investors. QIN issued the lawsuit although Head Trader informed QIN that closing VQR’s current trading positions, rather than maintaining those positions in accordance with VQR’s directional trading strategy, would result in losses for VQR investors. According to QIN management, the main trader closed VQR’s positions and ceded access to VQR’s trading accounts with QIN. Subsequently, QIN attempted to take control of VQR’s assets in order to allow QIN to meet certain Virgil Sigma investor redemption requests.
The Virgil Sigma and VQR fund have ceased operations and the liquidation and distribution of assets is in charge of a receiver appointed by the courts in matters of SEC v. Qin, 20 Civ. 10849.
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QIN, 24, was also sentenced to three years of supervised release and ordered the loss of $ 54,793,532.
Strauss praised the work of the Department of Homeland Security, Homeland Security Investigations. He also thanked the Securities and Exchange Commission for its collaboration and assistance in this investigation.
This case is managed by the fraud working group on securities and commodities. U.S. Deputy Adjudicator Daniel Tracer is in charge of the prosecution.