The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Stefan Qin, Founder of cryptocurrency arbitrage fund, Virgil Capital, for defrauding investors.
The fund manages around $92.4 million and makes money using a trading strategy called arbitrage. It moves money from exchange to exchange and profits from the differences in trading prices of digital currencies on different platforms.
The US regulator alleged that the crypto fund fabricated records as he tampered with a spreadsheet tracking the details of Sigma investments in 39 cryptocurrency exchanges. He falsely showed an average of $2 million holdings in three major US exchanges last year.
Furthermore, Qin informed investors seeking to redeem $3.5 million from investments that the money would be moved to the Var Multistrategy Fund, whereas, according to the SEC, they were not transferred.
The allegations further claim that the fund manager withdrew $1.7 million from investors’ deposits to pay off Chinese loan sharks.
The lawsuit was filed in a Manhattan federal court on Tuesday, and the SEC is now asking the judge to freeze another $25 million in digital assets managed by Qin.
Arbitrage – a Safe Trading Technique
Qin, a 23-year-old Australian, founded the New York-based crypto fund when he was 19 years old. He approached investors with Virgil Sigma Fund and pitched the arbitrage strategy which posses much lower risks compared to other trading strategies.
Qin is believed to be in South Korea at present but has already prepared to tackle the allegations of the SEC. His legal representatives issued a statement informing that Qin will cooperate with the SEC’s investigations and is “committed to ensuring that no investors are harmed.”
In recent years, the SEC has become vigilant towards crypto-related businesses and is actively busting fraudsters. Most recently it sued Ripple for illegally raising $1.3 billion by selling unregistered securities.