The U.S. Securities and Exchange Commission (SEC) moved quickly and decisively earlier this week when it filed an emergency action and obtained an order imposing an asset freeze and other emergency relief against Virgil Capital and its affiliated companies.
This asset freeze is in connection with an alleged securities fraud relating to Virgil Capital’s flagship cryptocurrency trading fund, Virgil Sigma Fund. The agency’s action alleges that the fraud was directed by Stefan Qin, an Australian citizen and part-time resident of New York, who owns and controls Virgil Capital and its affiliated companies.
According to the SEC’s complaint, Qin and his entities have been defrauding investors in the Sigma Fund since at least 2018 by making material misrepresentations about the fund’s strategy, assets and financial condition.
Furthermore, the complaint alleged that the defendants misled investors to believe their money was being used solely for cryptocurrency trading based on a proprietary algorithm, while Qin and the entities used investment proceeds for personal purposes or for other undisclosed high-risk investments.
Since at least July 2020, Qin and Virgil Capital have told investors who requested redemptions from the Sigma Fund that their interests would be transferred instead to another fund under the ultimate control of Qin but with separate management and operations, the VQR Multistrategy Fund. The complaint alleged that no funds were transferred and the redemption requests remain outstanding.
Lastly, the SEC’s complaint alleged that Qin was actively attempting to misappropriate assets from the VQR Fund and to raise new investments in the Sigma Fund.
Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, commented:
This emergency action is an important step to protect investor assets and prevent further harm. Qin allegedly made false promises to lure investors and then continued his deception to conceal his misuse of investor funds.
The investigation is ongoing.