Cases of theft and frauds have increased in the cryptoverse over the last few years. In order to prevent these, several concerned institutions have filed legal actions whenever there’s a crypto-related fraud.
Adding to this list, the Attorney for the Southern District of New York—Audrey Straus—filed a lawsuit against one Stefan He Qin. Stefan was the founder of two New-York-based crypto hedge funds; Virgil Sigma and VQR. Both of which were now defunct.
According to the statement of facts, Stefan eventually ripped off his investors of over $54 million.
He published a peculiar strategy to earn profits from arbitrage. He promised his investors that this strategy won’t be affected by market volatility and investors are not open to any relative risk. He called the strategy “market-neutral.”
At the end of the day, it turned out that Stefan was not using the money for the agreed arbitrage. Reports have it that he spent some parts of the investment on personal expenses and diverting for personal investments.
“Rather than investing the fund’s assets in a cryptocurrency arbitrage trading strategy as advertised, QIN embezzled investor capital from Virgil Sigma,” the statement reads.
He couldn’t provide the fund when some investors requested for theirs. Then the Attorney of the District stepped in to represent the plaintiffs. He pled guilty to the charge of securities fraud.
The Court decided his case on Wednesday, 15th of September. The Judge sentenced him to 90 months imprisonment with forfeiture of his assets.