SEC charges crypto fund manager

SEC charges crypto fund manager with fraud and freezes assets

  • The SEC has filed fraud charges against a hedge fund based on cryptography.
  • The SEC states that Stefan Qin, the fund’s director, misled and defrauded investors.
  • As the prices of crypto-currencies reach new heights, the SEC continues to make its presence felt.

The SEC has launched an emergency action against Virgil Capital LLC, all of its affiliates and fund manager Stefan Qin to freeze the company’s assets in connection with potential securities fraud.

The Securities and Exchange Commission (SEC) has cracked down on the Bitcoin Bank crypto space as the asset class continues to grow and reach unprecedented heights on multiple measures.

The explosive news of Christmas week came when the SEC charged Ripple Labs and two of its executives with the sale of $1.3 billion in unregistered securities. This resulted in a more than 50% decrease in XRP’s market capitalization. The SEC has now attacked an allegedly fraudulent crypt fund manager.

According to the official press release:

Mr. Qin and his entities have been defrauding Sigma Fund investors since at least 2018 by making material misrepresentations about the fund’s strategy, assets and financial position. The complaint alleges that the defendants misled investors into believing that their money was being used solely for trading in cryptography based on a proprietary algorithm, while Qin and the entities used the proceeds of the investments for personal purposes or other undisclosed high-risk investments.

The complaint continues, stating that investors who requested redemptions from the original Sigma fund (Virgil Capital’s cryptomony trading fund) had their interests transferred to another fund controlled by Qin.

This fund was supposed to have management and operations separate from the Sigma Fund. The SEC alleges that Qin never transferred any of the funds, and that he also allegedly diverted the funds to raise new investments in his Sigma fund based on cryptography.

Kristina Littman, head of the cyber unit of the SEC’s Law Enforcement Division, continued:

This emergency action is an important step to protect investors‘ assets and avoid further harm. Mr. Qin allegedly made false promises to attract investors and then continued his deception to conceal his misuse of investors‘ funds.

Do price increases lead to more scrutiny?

The SEC has not hesitated to take on crypto projects and fund managers in the past. Will the U.S.-based watchdog trigger a new wave of increased global regulatory oversight?

As Bitcoin’s price reaches unprecedented highs, authorities are probably looking at how they can benefit from this asset class as well, beyond protecting investors attracted to the decentralized blockchain technology.

As the space for cryptography matures, users should expect increased oversight from government agencies.


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