SEC Charges 23-Year-Old Crypto Fund Manager with Fraud

Stefan Qin allegedly lied to investors about Virgil Sigma Fund’s strategy, assets, and financial condition.


The US Securities and Exchange Commission (SEC) has accused the 23-year-old founder of an investment management firm of defrauding investors in the company’s flagship cryptocurrency trading fund by lying about the fund’s strategy, assets, and financial condition.

The regulator filed an emergency action and obtained an order imposing an asset freeze against Virgil Capital LLC and its affiliated companies in connection with an alleged securities fraud relating to its Virgil Sigma Fund. The SEC alleges the fraud was led by Stefan Qin, an Australian citizen and part-time resident of New York, who owns and controls Virgil Capital and its affiliated companies.

The Sigma Fund is a limited partnership pooled investment fund that claims to use a proprietary arbitrage trading strategy that continually scans for price differences between cryptocurrency markets. Montgomery Technologies, Virgil Capital’s parent company, stated in a March SEC filing that $92.4 million was held in the Sigma Fund. And as of May, according to the Sigma Fund’s records, there were approximately 110 investors in the Sigma Fund, nearly half of whom were from the US, with account balances ranging from $100,000 to $16 million.

The SEC said a marketing brochure for the Sigma Fund from September 2019 listed monthly performance figures from August 2016 through August 2019 and claimed cumulative returns of 2,811% over that time period, compared with 1,500% for Bitcoin over the same time period. Qin also allegedly claimed the fund held millions of dollars worth of digital assets at 39 trading platforms, but in reality it held no assets at those platforms, and the purported platform account balances were fabricated.

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According to the SEC’s complaint, while Qin misled investors into believing their money was being used for cryptocurrency trading, he allegedly used investment proceeds for personal purposes or for undisclosed high-risk investments. And when investors in the Sigma Fund sought to redeem their shares in July, Qin began employing a “series of artifices and deceptions,” the SEC said.

Qin allegedly first told certain investors who wanted to redeem investments from the Sigma Fund that he would directly transfer their investments to another fund, called the VQR Fund, in lieu of a redemption. Qin described these as “in-kind” transfers. However, the in-kind transfers never materialized, according to the SEC, which said the investors began contacting an investor relations employee from the VQR Fund to confirm their investments, but no money was received by the VQR Fund for the purported transfers.

Qin then told investors and the investor relations employee that the transfers would occur as bank transfers of fiat currency, but the redemptions still had not been satisfied. The SEC’s complaint also alleges that Qin is actively attempting to misappropriate assets from the VQR Fund and to raise new investments in the Sigma Fund.

“This emergency action is an important step to protect investor assets and prevent further harm,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. “Qin allegedly made false promises to lure investors and then continued his deception to conceal his misuse of investor funds.”

The SEC’s complaint, filed in the Southern District of New York (SDNY), charges Qin and the entities he controls with violations of the antifraud provisions of the federal securities laws. The regulator is seeking permanent injunctions, including conduct-based injunctions, disgorgement with prejudgment interest, and civil penalties.

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Funded Ratio for Canadian Pension Plans Improves in 2020

After plummeting during the first quarter, the funding level of Canadian defined benefit plans rebounded to end the year at 91.2%.


After seeing their funded status tumble to almost 80% in late March, Canadian defined benefit (DB) pension plans rebounded strongly for the rest of the year and saw their aggregate funded level improve to 91.2% from 90.8% a year earlier, according to professional services firm Aon.

“Equity markets performed strongly in 2020 and helped funded ratios improve,” Erwan PirouCanada CIO for Aon’s retirement solutions unit, said in a statement. “However, some pension plans did not realize the full benefit of the equity market rally, as some active equity managers underperformed their benchmark.”

Through its Pension Risk Tracker, Aon calculates the aggregate funded position on an accounting basis for the companies in the S&P/TSX Composite Index with DB plans. The funded status deficit of the plans narrowed slightly, declining C$200 million ($157.8 million) as asset increases of C$18.7 billion were offset by liability increases of C$18.5 billion.

When global equity markets and bond yields plummeted during the first quarter of the year as COVID-19 began to spread worldwide, the median solvency positions of Canadian DB pension plans fell by more than 13 percentage points from the previous quarter, marking the plans’ lowest level of financial health since 2016.

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Aon reported that Canadian pension assets ended the fourth quarter up 3.9% and increased 9.9% for all of last year. It also said the year-end long-term Government of Canada bond yield dropped 55 basis points (bps) relative to the last year-end rate, and that credit spreads widened by 13 bps. The firm added that this combination led to a decrease in the interest rates used to value pension liabilities to 2.5% from 2.92%. Because most Canadian plans are still exposed to interest-rate risk, the increase in pension liability caused by decreasing interest rates offset the positive effect of asset returns on a plan’s funded status, Aon said.

Pirou suggested equity managers look at the structure of their portfolio to make sure it’s balanced across different equity styles so it can perform well in different environments. And Aon’s Nathan LaPierre said plan sponsors looking at de-risking options should “redouble their efforts” to lock in improved funded positions, while those with ongoing DB plans will need to deal with lower expected investment returns and “ultra-low” interest rates.

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