SEC Freezes Virgil Capital’s Assets, Seeks Penalties from Company CEO Over Fraud Allegations

The U.S Securities and Exchange Commission (SEC) has gained a reputation for being ruthless in its pursuit of cryptocurrency-related scams and trading schemes. This week, the agency scored another win as it got approval to freeze the assets of a notable crypto investment firm.

Classic Company Fraud

According to an official announcement from the SEC, the regulator received permission from a New York court to seize assets belonging to the crypto hedge fund Virgil Capital LLC. The announcement also mentions Stefan Qin, Virgil Capital’s managing partner, whose assets were also frozen.

The freeze is coming after allegations of fraud from Qin. According to the SEC, Qin had used Virgil’s Sigma Fund to defraud investors since 2018, making false representations of the fund’s strategy, size, and financial condition.

The Australian businessman had reportedly told investors that he would invest their money in a trading algorithm that profited on widespread arbitrage between exchanges. However, Qin and other company officials used the funds to bankroll personal expenses and make investments in other undisclosed high-risk investments.

When investors eventually confronted Qin and wanted to take their money out, Qin convinced them to move their cash from the Sigma Fund to its VQR MultiStrategy Fund, which controlled $25 million in assets. The businessman then lied that the bank had delayed transactions between the two funds. As the SEC alleged, the delay happened because the Sigma Fund did not have enough money to complete the transactions in question.

The SEC has now charged Qin, Virgil Capital, and several other affiliates with breaking federal securities and anti-fraud laws. The agency is seeking trading bans for all defendants and a return of investor funds and civil penalties.

SEC Strikes Down ShipChain Token Offering

Virgil’s case is the SEC’s latest crackdown against crypto investment scams. Qin and his affiliates appear to deserve what is coming their way. Still, the SEC has also gained a reputation for its hardline approach to the crypto space.

Last week, the agency turned its ire to ShipChain, a blockchain company looking to revolutionize the shipping space. After raising $27.6 million from 2017 to 2018, ShipChain had promised to improve shipping transparency with its blockchain platform. The firm also tied use of the platform to the purchase of SHIP tokens, which it was working on at the time.

ShipChain had announced the launch of its mainnet in July this year, looking to launch its SHIP token for users. In last week’s action, the SEC explained that it had determined ShipChain’s Initial Coin Offering (ICO) to be an unregistered offering. The agency explained that the token sale had been illegal. With ShipChain even paying its promoters in SHIP tokens. The SEC fined ShipChain $2.05 million, adding that the company will need to shut its token down.