Stefan He Qin, the founder of two now-defunct cryptocurrency hedge funds, has been sentenced to seven and a half years in prison for embezzling. According to the U.S. Department of Justice, Qin was also sentenced to three years of supervised release and ordered to forfeit over $54.7 million. Earlier in February, Qin plead guilty to one count of securities fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.
The 24-year old Australian national owned and ran two cryptocurrency hedge funds in New York between 2017 and 2020 — the Virgil Sigma Fund and the VQR Multistrategy Fund. The Virgil Sigma Fund reportedly had over $90 million under management from dozens of investors around the world, which Qin secured by advertising it as a “market-neutral” fund. Qin claimed the fund wasn’t at risk from crypto price movements and therefore provided a relatively safe and liquid investment for those looking for crypto exposure.
The Department of Justice found that Qin had been embezzling funds from the Virgil Sigma Fund from 2017. Rather than investing the fund’s asset in cryptocurrency arbitrage trading, Qin used the funds to pay for personal expenses and make personal, illiquid investments in real estate.
As a result of these fraudulent activities, Qin dissipated nearly all of the investor capital in Virgil Sigma Fund and lied to the fund’s investors about the status of their investment capital. In 2020, when the fund’s clients issued redemption requests that Qin couldn’t fill, he attempted to wind down all trading positions from VQR and transfer the funds to Virgil Sigma.