The US Securities and Exchange Commission (SEC) has proven to be very proactive in its pursuit of crypto-related trading schemes and scams. This week, the agency managed to score another win when it received the approval for freezing the assets of a prominent crypto investment firm. The official announcement from the SEC said that a New York court had granted them permission for seizing assets that belong to the crypto hedge fund known as Virgil Capital LLC. The managing partner of Virgil Capital, Stefan Qin, was also mentioned in the announcement and his assets were also frozen by the regulator.
The assets were frozen after allegations of fraud were made against Qin. The SEC said that the Sigma Fund at Virgil Capital had been used by Qin for defrauding investors since 2018 and he had made false representations of the fund’s size, strategy and financial condition. According to reports, the Australian businessman had told investors that their money would be invested in a trading algorithm that made profits on widespread arbitrage between different exchanges. However, the funds were used by Qin and other company officials for bankrolling their personal expenses and making investments in other high-risk and undisclosed investments.
When Qin was eventually confronted by investors and they wanted to take out their money, the managing partner convinced them into moving their cash to the VQR MultiStrategy Fund from the Sigma Fund, which had a total of $25 million assets in control. The businessman then lied to the investors and said that transactions between the two funds had been delayed by the bank. According to the SEC, the delay occurred because there wasn’t enough money in the Sigma Fund for completing the said transaction. Virgil Capital, Qin and a number of other affiliates have now been charged by the SEC with breaking anti-fraud and federal securities law.
The regulator is now planning on imposing trading bans on all defendants, civil penalties and a return of investor funds. The case with Virgil is the latest crackdown made by the SEC against crypto investment scams. It appears that Qin and affiliates deserve what is coming to them. Nonetheless, the SEC has developed a reputation for the hardline approach it has taken to towards the crypto space. Last week, ShipChain became the focus of the agency’s ire, which is a blockchain firm aiming to revolutionize the shipping space. Shipchain had raised funds from 2017 to 2018 of about $26.7 million with the purpose of ensuring transparency with their blockchain platform.
The company also connected the use of their platform to the SHIP tokens purchase, which it had been developing at the time. The tokens’ had been launched on the mainnet by ShipChain in July. The SEC explained in its last week action that the Initial Coin Offering (ICO) by the company had been an unregistered one. According to the agency, the token sale is illegal and ShipChain had even paid its promoters in SHIP tokens. A fine of $2.05 million had been imposed on ShipChain by the SEC and its token will also be shut down.