The US Department of Justice (DOJ) announced on February 4 that Stefan He Qin, an Australian national and founder of crypto hedge funds has admitted to defrauding his clients of over $100 million in investments.
Qin was charged with one count of securities fraud by the DOJ for stealing investor money from his hedge funds Virgil Sigma and VQR Multistrategy Fund LP (VQR), both of which are based in New York City.
The 24-year-old Chief Information Officer (CIO) of both hedge funds pled guilty during his trial in the Manhattan Federal Court presided by Judge Valeri Caproni. Although the court has yet to determine his penalty, the charge given by the DOJ can carry a maximum term of 20 years in prison.
‘Stefan He Qin drained almost all of the assets from the $90 million cryptocurrency fund he owned, stealing investors’ money, spending it on indulgences and speculative personal investments, and lying to investors about the performance of the fund and what he had done with their money,’ stated Audrey Strauss, one of the US attorneys handling this case.
In 2017, Qin stole assets from Virgil Sigma and invested it in non-crypto related transactions. He embezzled the funds for personal expenses such as food and apartment rent.
‘As he further admitted today, Qin attempted to steal money from another fund he controlled to meet the redemption demands of the defrauded investors in the former fund. The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery,’ said Strauss after Qin pleaded guilty during his federal trial.
To cover his tracks, Qin prepared and circulated monthly statements to the investors that did not accurately reflect the results of the cryptocurrency tradings of both his hedge funds. Additionally, he prepared marketing materials including summary reports that misrepresented the ‘remarkable profits’ Virgil Sigma was earning.
Qin began to struggle meeting redemption requests from investors in Virgil Sigma in the summer of 2020, according to the report posted by the DOJ on their website.
To conceal his fraudulent actions from investors, he paid them off by stealing capital from his other hedge fund, VQR. Qin convinced the investors that rather than withdrawing their funds from Virgil Sigma, they should transfer it into a VQR investment.
When this strategy didn’t work, Qin falsified wire transfer requests that were delayed to convince investors that he had requested the transfer but got delayed.
‘Qin orchestrated this reprehensible criminal scheme for many years, making misrepresentations and false promises that coaxed investors into pouring millions of dollars into fraudulent cryptocurrency firms, all the while stealing the hard-earned money of his investors,’ stated Peter C. Fitzhugh, a special agent from Homeland Security Investigations (HSI).
In light of Qin pleading guilty for one count of securities fraud, Fitzhugh reminded fraudsters through a press release posted in the DOJ website that the HSI and their partners will uncover their schemes and bring them justice.
The sentence for Qin on his plea will be determined by Judge Caproni and is scheduled to be announced three months from now on May 20, 2021.
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