Founder of $90M digital currency hedge fund sentenced to 7 years in prison

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The founder of two digital currency ventures, including a $90 million hedge fund, has been sentenced to over seven years in prison on charges of defrauding the investors. Stefan He Qin, the founder of a hedge fund known as Virgil Sigma Fund LP, will also face three years of supervised release and forfeit over $54 million that was embezzled from his investors.

Qin controlled New York-based Virgil Sigma from 2017 to 2020, purporting to employ arbitrage strategies to make profits. He touted his strategy to be market neutral, meaning that he would make money regardless of market conditions, authorities said. He reportedly raised $90 million from dozens of investors, many of them in the United States. He publicly claimed to have been profitable in every month from August 2016, with the sole exception of March 2017.

In February 2020, Qin founded the second fund, known as VQR Multistrategy Fund LP. With this fund, he would speculate on market movements and was not market neutral as with his previous fund. He hired a head trader and other investment professionals to trade the investors’ funds.

However, since founding the first fund, Qin has been defrauding investors, the U.S. Department of Justice alleges. He used a large portion of investor funds to pay for personal expenses such as food and rent for a New York penthouse, make investments in illiquid assets such as real estate and invest in ICOs. He ended up spending almost all the investors’ money in Virgil Sigma fund.

When investors demanded to redeem their investment, he tried to take funds from his second hedge fund, VQR to pay off the earlier investors. This was despite a warning from the head trader that unwinding their positions at the time would lead to losses for the investors.

The 24-year-old Australian pleaded guilty to securities fraud earlier this year as CoinGeek reported. U.S. District Judge Valerie Caproni has now sentenced Qin to 90 months in prison and three years of supervised release, and to forfeit $54,793,532.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and
Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.