Founder of Ponzi Crypto Hedge Fund Sentenced to 7 Years in Prison

Illogical returns led to an investigation into a Ponzi crypto hedge fund that finally landed its founder, Stefan Qin, behind bars.

Something Fishy

Stefan Qin, Virgil Sigma Fund LP founder, was sentenced to 7 ½ years after defrauding more than 100 people of approximately $90 million after suspicious investors exposed his plot. Stefan Qin ran two crypto hedge funds, namely Virgil Sigma Hedge Fund LP and VQR Multistrategy Fund LP in New York. ‍

When faced with redemption requests he couldn’t fulfill, Qin doubled down on his scheme by attempting to plunder funds from VQR to satisfy his victim investors’ demands [sic] – U.S Attorney Audrey Strauss said in an official press release.    ‍

The 24-year-old Australian purportedly deploys a strategy to capitalize on the arbitrage strategy in the cryptocurrency market. In an interview with CNBC in 2018, Stefan was described as a ‘very bright 21-year-old’ that runs a hedge fund that profits from crypto asset’s massive swings. The fund was described as ‘market-neutral’ and not exposed to the risk of cryptocurrency fluctuations, providing a safe investment to its investors. https://cdn.embedly.com/widgets/media.html?type=text%2Fhtml&key=96f1f04c5f4143bcb0f2e68c87d65feb&schema=twitter&url=https%3A//twitter.com/cnbcfastmoney/status/968623359146844161&image=https%3A//abs.twimg.com/errors/logo46x38.png

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The fund’s assets were not used for arbitrage trading strategy but were instead used for other purposes, including funding his opulent lifestyle. The court slapped a fine of $54.8 million, representing the proceeds traceable to his offenses.

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House of Cards 

Qin’s numbers to assure his investors started to portend suspicion when the fund’s performance was not hinged on the overall market performance. Numbers audited purportedly painted a rosy picture of the fund’s performance. 

A press release by the U.S. Attorney exposed false account statements and fake tax documents that Qin circulated to his investors. The audits showed returns of more than 100% in 2018, a period where the cryptocurrency market took a tumble.

The startling revelation by the United States Department of Justice shows that apart from funding his own lifestyle, money was also to invest in entities that are not related to cryptocurrencies and real estate. He then tried to cover up the fraud by paying Sigma investors with funds from VQR.

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Red Flags

Crypto assets are a new asset class that is drawing a lot of attention and interest. Many investors are often too eager to participate without doing the necessary due diligence. Extraordinary gains are often tied to increased exposure to risk. Stefan had his credentials bolstered when the media interviewed him without much background check. The public misinterpreted this as a stamp of approval. 

Regulators do have an important role to play. Funds that are licensed and solicit investment from the public must be properly regulated, accredited, and monitored. Regulators must operate within a clear regulatory framework so that responsible and compliant players can enter the space to provide investment avenues for investors. 

But ultimately, investors must exercise caution. If they choose to invest through an investment scheme, it should have a credible profile, with a reliable track record and the individuals managing it. Investors must take ownership of their financial decisions. Inflated promises are often tell-tale signs of a scam.

Source : bsc.news