- A New York court has granted the SEC the right to freeze assets under control by Virgil Capital.
- The SEC alleges that Virgil and its managing director defrauded investors.
- Instead of putting funds toward a crypto trading bot, it conducted off-the-books investments.
The US Securities and Exchange Commission today announced that a New York court has granted it the right to freeze the assets of crypto-asset firm Virgil Capital LLC and its managing partner, Stefan Qin, for misappropriating money Qin told investors was earmarked for a crypto trading bot.
The SEC obtained the rights to freeze the assets of the firm, which claims to control $112 million, over allegations that Qin has defrauded investors in Virgil Capital’s Sigma Fund since 2018 by misrepresenting its strategy, assets, and financial condition.
SEC Obtains Emergency Asset Freeze, Charges Crypto Fund Manager with Fraud https://t.co/GPcC2e8duI
— SEC_News (@SEC_News) December 28, 2020
The SEC alleges that Qin, a 23-year-old Australian with offices in New York and Shanghai who is believed to currently reside in Seoul, misled investors by telling them that he would invest their money in a crypto trading algorithm that profited from price differences between exchanges.
I just published “The following is a write-up of the speech that I did for bitfwd on Friday 20th at UNSW on…” https://t.co/U8o6Xyfkvg
— Stefan Qin (@stefqin) November 20, 2017
In reality, alleges the SEC, Qin and his affiliates also used the money for personal purposes or other undisclosed high-risk investments, such as ICOs.
“Qin allegedly made false promises to lure investors and then continued his deception to conceal his misuse of investor funds,” SEC Cyber Unit Chief Littman said in a statement.
And when investors wanted to take their money out, the SEC alleges that Qin convinced them to instead move funds from its Sigma Fund (which the SEC alleges was just…Qin) to its $25 million VQR MultiStrategy Fund.
Then Qin reportedly told investors that the bank had delayed their transactions between the two funds. “In reality, the wire transfers were rejected because there were not sufficient funds in the Sigma Fund’s account to complete the wire transfers,” the SEC alleges.
— CNBC's Fast Money (@CNBCFastMoney) February 27, 2018
The SEC’s complaint, filed in the Southern District of New York on Dec. 22, 2020, charges Qin, Virgil Technologies LLC, Montgomery Technologies LLC, Virgil Quantitative Research LLC, Virgil Capital LLC, and VQR Partners LLC with violations of the antifraud provisions of the federal securities laws.
Bitcoin’s crashing? That won’t stop arbitrage traders from raking in millions https://t.co/aHznWZFtab
— The Wall Street Journal (@WSJ) February 4, 2018
The action seeks to ban the firm’s operations, order its operators to return money to investors, and force them to pay civil penalties. Decrypt has reached out to Qin for comment and will update this piece should we hear back.