Cryptocurrency whiz kid gets 7½ years behind bars for Ponzi scheme frauds

*US Federal prosecutors disclose 24-year-old whiz kid defrauded over 100 people out of about $90 million in coin offerings and real estate

*I feel ashamed to look the victims, many of whom were family, friends or business associates, in the eye and tell them I’m sorry, but I must ─ Self-proclaimed math whiz Stefan Qin

Isola Moses | ConsumerConnect

If some returns on investment (RoI) offerings are too good to be true, they probably are, say experts.

Likewise, Stefan Qin’s investors had thought they found a sure thing, a hedge fund that was generating 500 percent RoI by exploiting the price gaps between cryptocurrencies on 40 exchanges across the world.

Instead, the 24-year-old self-proclaimed math whiz used their money on a lavish lifestyle, including a $23,000-a-month Manhattan penthouse apartment, in the United States (US), and failed investments in initial coin offerings and real estate.

Cryptocurrencies

Federal prosecutors, describing the young man as “a potentially very dangerous person”, said Qin defrauded more than 100 people out of about $90 million in phony investment offerings, Bloomberg report said.

After some of his victims said Qin should spend as long as possible behind bars for securities fraud, US District Judge Valerie Caproni sentenced him Wednesday, September 15, 2021, to seven-and-a-half years, and called him “a potentially very dangerous person.”

Justice Caproni stated Qin “deliberately and consciously chose a path” to rip off investors, including fake account statements and lying to clients about how he was using their money.

“This kind of white collar crime is just as devastating to victims as other types of crime, and it will be punished severely,” said the Judge.

According to Caproni, the sentence was intended to discourage others from similar crimes and to protect the public from Qin, who had no trouble lying to his investors.

Manhattan US Attorney Audrey Strauss in a statement said: “Virgil had a stated market strategy of ‘market neutral,’ ‘safe investments’.

“Qin’s investors soon discovered that his strategies weren’t much more than a disguised means for him to embezzle and make unauthorised investments with client funds.”

It was gathered more than a dozen investors had written letters to the judge, including several who said they had lost their life savings to Qin, an Australian national who dropped out of college to found Virgil Sigma Fund LP in 2017.

One woman said she was left “homeless and destitute.”

In his response to the sentence, Qin told the Judge he “felt absolutely heartbroken” to read the letters, many of whom were family, friends or business associates.

The whiz kid fraudster stated, “I feel ashamed to look them in the eye and tell them I’m sorry, but I must.”

Qin reportedly claimed that he developed a special trading algorithm called Tenjin that could earn profits by buying a cryptocurrency on one exchange and selling it at a higher price on another.

Shortly after starting Virgil, he bragged the fund produced an annual return of 500 percent 2017.

The Wall Street Journal wrote a profile of him in 2018, when he managed $23.5 million, and by 2020, he had raised over $90 million.

He said he started the hedge fund in his first year of college using an algorithm he thought was an “amazing money making machine.”

However, “things started to go south, people started to become suspicious of my promises,” Qin told the Judge during trial.

He further said: “Instead of coming clean, I did the worst thing and doubled down on my lies.

“I thought I was the main protagonist and life was a video game and I had just found the cheat code to beat it. As we know life is not a video game.”

Towards the end of 2020, as losses mounted, crypto investors started to demand refund of their money.

To make those payments, Qin tried to raid another fund he had started, the VQR Multistrategy Fund LP, according to prosecutors.

But the US Securities and Exchange Commission (SEC) December got cryptocurrency exchanges to put a freeze on VQR’s assets in the country.

After that, Qin flew back to the US from South Korea, surrendered to the regulatory authorities February, and pleaded guilty the same day, report stated.

While Qin faced as much as 20 years in prison, federal sentencing guidelines call for 151 to 188 months.

Probation officials recommended 96 months, based on his lack of a criminal record and his voluntary return from overseas to face charges.

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