$100 Million Crypto Fraudster Receives Seven-Year Jail Sentence

$100 Million Crypto Fraudster Receives Seven-Year Jail Sentence

Stefan He Qin, a twenty-four year old Australian national, has been sentenced to ninety months in prison and a penalty of almost $55 million for defrauding over a hundred people out of about $114 million.

Qin started a hedge fund in his first year of college called Virgil Sigma Fund Ltd, back in 2017. The fund promised investors 500% returns through an algorithm Qin called “Tenjin”, which claimed to exploit arbitrage opportunities buying and selling crypto across different exchanges.

In one year, Virgil had netted $23.5 million in assets under management, earning the fund a profile in the Wall Street Journal. By 2020, that number had increased to $90 million.

By February 2020, Qin had started a second fraudulent hedge fund: VQR, which pooled around $24 million in assets-under-management.

Crashing down

Qin soon lost control of his racket. He used investor capital stolen from Virgil Sigma to rent a penthouse in New York City and fund a lavish lifestyle. He began investing substantial amounts of stolen money in illiquid investments outside the crypto market.

He also used Virgil funds to splash out on various initial coin offerings that had nothing to do with the arbitrage strategy he’d touted.

Everything came crashing down in December 2020. As redemption requests started pouring in from Virgil investors, Qin told his head trader at VQR to pack up its trading positions so that he could use the funds to satisfy the demands of Virgil clients.

Qin returned to the U.S. and surrendered himself to authorities in February this year. He faced as much as 20 years in prison, but on account of his clean record and voluntary return to face trial, he will only serve seven and a half years.

Scams of this nature are not uncommon in crypto. Many fraudsters lure their victims with the bait of sophisticated trading algorithms and the promise of significant returns.

In July this year, mother/son duo Joy and Brent Kovar came up against the U.S. Securities and Exchange Commission after defrauding 277 investors out of $12 million by promising fixed annual returns of 20-30% through a “supercomputer”.

There’s wisdom in the old adage: “If it looks too good to be true, it probably is.”

Source