The U.S. Securities and Exchange Commission has filed a lawsuit against a cryptocurrency hedge fund founder for fraud. The regulator is seeking an emergency order freezing $25 million in digital assets held by a crypto hedge fund he controls.
Crypto Hedge Fund Founder Sued in the US
The U.S. Securities and Exchange Commission (SEC) has sued a crypto hedge fund founder in Manhattan federal court. The regulator alleges that Stefan Qin, a 23-year-old Australian, defrauded investors in his $92.4 million cryptocurrency arbitrage fund, according to Tuesday’s court filing.
Qin founded New York-based Virgil Capital and four other entities. He allegedly fabricated records, failed to redeem $3.5 million for investors, and tried to withdraw $1.7 million of investor funds to pay off Chinese loan sharks, the SEC said. According to Reuters:
The SEC has asked U.S. Judge Lorna Schofield for an emergency order freezing $25 million in digital assets held by another Qin-controlled fund.
The SEC explained that Qin controls two cryptocurrency funds: the Virgil Sigma Fund and the VQR Multistrategy Fund.
He “claims to trade for the Sigma Fund by taking a market-neutral ‘arbitrage approach to the cryptocurrency market,’ utilizing ‘a proprietary algorithmic trading system that continually scans for price differences between cryptocurrency markets,’” the SEC noted. Qin further claimed that his trading algorithm can “generate better returns than an investment in bitcoin.”
The Sigma Fund documentation provided to investors claimed that the fund “held millions of dollars worth of digital assets at 39 trading platforms, including three of the largest U.S.-based platforms,” the SEC wrote, emphasizing:
In reality, the Sigma Fund held no assets at any of those U.S.-based platforms, and the purported platform account balances were fabricated.
Moreover, the SEC explained that the crypto hedge fund founder told investors wanting to redeem…