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Mining rigs mine the Ethereum and Zilliqa cryptocurrencies at the Evobits cryptocurrency farm in Cluj-Napoca, Romania, on Wednesday, Jan. 22, 2020. Photo: Bloomberg

Founder of New York cryptocurrency hedge funds admits to massive fraud

  • Stefan He Qin claimed his algorithm produced arbitrage profits
  • Australian national, 24, plundered one fund to cover another

A 24-year-old founder of two New York-based cryptocurrency hedge funds with more than US$100 million in investments pleaded guilty Thursday to securities fraud.

Stefan He Qin was charged with duping investors by claiming he used a trading algorithm to take advantage of price differences for a number of cryptocurrencies, federal prosecutors said in an emailed statement.

Qin stole investor money from his Virgil Sigma Fund LP, and attempted to dip into his VQR Multistrategy Fund LP to pay back investors in the first fund, prosecutors said. He admitted trying to steal from yet another fund he controlled to cover VQR fund redemption demands, according to the statement.

“The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery,” Audrey Strauss, the acting US Attorney for Manhattan, said in the statement.


What are cryptocurrencies?

What are cryptocurrencies?

Qin’s fraud relied on misrepresentations about his investment strategy to lure millions of investor dollars into the fraudulent cryptocurrency firms, prosecutors said. Qin, an Australian national, embezzled almost all the capital from the Virgil Sigma fund to pay for, among other personal expenses, a penthouse apartment. He faces as long as 20 years in prison.

The US Securities and Exchange Commission filed a parallel civil case against Qin in December.

A lawyer for Qin could not immediately be located for comment.