The Securities and Exchange Commission (SEC) has secured a final judgment against Stefan Qin, founder of Virgil Sigma Fund.
According to an order, signed by Judge Lorna G. Schofield of the New York Southern District Court on March 1, 2022, the defendant is permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security, as further set forth herein.
Qin is also liable for disgorgement of $36,352,028 with pre-judgment interest thereon in the amount of $3,494,791, for a total of $39,846,819, representing net profits gained as a result of the conduct alleged in the SEC complaint.
This amount shall be deemed satisfied by: (1) Defendant’s relinquishment of all legal and equitable right, title, and interest in all properties, businesses, funds and assets currently controlled by the Court Appointed Receiver in this action, and all claims he might assert against the receivership estate; and, (2) the judgment, including the order of forfeiture of $54,793,532.14, entered against him in a related criminal case.
The complaint against Qin alleges that he has been engaged in a deceptive course of conduct, using materially false and misleading statements to investors and others, causing serious harm and the threat of further harm to two funds he controls, the Virgil Sigma Fund LP (the “Sigma Fund”) and the VQR Multistrategy Fund LP (the “VQR Fund”).
According to the Complaint, Qin has been his control and ownership of five entities, Virgil Technologies LLC, Montgomery Technologies LLC, Virgil Quantitative Research, LLC, Virgil Capital LLC, and VQR Partners LLC. He has perpetrated a scheme to lure investors into the two Funds, which are marketed as using algorithmic trading strategies involving cryptocurrencies, using false promises and assurances.
Qin, who at 19 founded the Sigma Fund and its managing entity, Virgil Capital, has consistently claimed since 2016 that his proprietary, market-neutral arbitrage trading strategy in cryptocurrencies uses more than 40 digital asset trading platforms around the world, and has achieved positive returns in every month except one.
The SEC’s Complaint also alleges that Qin and Virgil Capital prepared and provided to investors documentation for the Sigma Fund in 2019 that claimed the Fund held millions of dollars worth of digital assets at 39 trading platforms, including three of the largest U.S.-based platforms. In reality, the Sigma Fund held no assets at any of those US-based platforms, and the purported platform account balances were fabricated.
Beginning in mid-2020, investors in the Sigma Fund were thwarted in their attempts to redeem their investments. Through a series of false and misleading devices, Qin convinced at least nine investors, whose interests totaled approximately $3.5 million, to “transfer” their investments from the Sigma Fund into the VQR Fund.
However, the transfers never materialized and Qin has used excuses and falsehoods directed at investors, and the separate personnel who operate the VQR Fund, to evade any explanation for where the investors’ assets are.
In December 2020, Qin sought the aid of his colleagues who manage the VQR Fund in Qin’s attempt to withdraw $1.7 million that he claimed he urgently needed to pay back loans to lenders he feared in China. When VQR Fund employees refused his efforts to withdraw investor assets, Qin made numerous admissions about his conduct, including having told “white lies” to investors to placate them.
At the same time, Qin has not relented from his attempts to withdraw assets from the VQR Fund which belong to investors.
By engaging in the conduct, Qin and the entities he controls have violated, and unless restrained and enjoined will continue to violate, the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Entity Defendants also aided and abetted Qin’s violations of the same provisions.