Founder of $90M cryptocurrency hedge fund sentenced to seven years in prison

https://www.justice.gov/usao-sdny/pr/founder-90-million-cryptocurrency-hedge-fund-sentenced-more-seven-years-prison

by clpm4j • 5 years ago

127 106 5 years ago

justice.gov

ProjectArcturis• 5 years ago

Looks like a pretty standard Ponzi scheme, just that he claimed to be making money with some kind of crypto arb.

p1necone• 5 years ago

With unregulated crypto everything old is new again. There's ponzi schemes and pump and dumps everywhere.

eaenki• 5 years ago

What happens if Hypothetically he has those $54mm He was ordered to pay back in a properly hid zcash wallet and he says he just gambled them away / lost the keys?

shapefrog6• 5 years ago

Hodl and do your time? Come out of the country club prison in a few years and you have a pile of crypto that might be worth something, or nothing.

bhhaskin• 5 years ago

Except you can never use it. You would be monitored and suddenly having unexplained income would for sure trigger an alert. You would then go to jail for perjury.

thegypsyking5• 5 years ago

What type of visa does a 20 year old get to start a hedge fund on wall street? I’m really curios, because working on this is my dream but I’m stuck as an L1 engineer at faang instead :(. I worked really hard to get here but I really wish I could do something like this (legitimately) instead.

shapefrog6• 5 years ago

EB-5 Immigrant Investor Program - all it takes is 1mil usd and you are in.

pvarangot2• 5 years ago

Back then it was 500k. And also it's not that you loose the money, you actually do invest it but it has to be on businesses that the government green lights as "job creators". When I looked into it, those were mostly agriculture or real estate.

arcticbull• 5 years ago

If you've got the chops to run a hedge fund, an O-1 parlayed into an EB1A green card.

Or, if you're from a listed country, an E-2 treaty investor visa.

gruez• 5 years ago

Is there anything more? Just make a 1M investment and you get a greencard?

asadlionpk• 5 years ago

found your company, hire yourself on h1/o1.

thegypsyking5• 5 years ago

Not really possible when you’re already inside US with a visa tied to your company. Plus not sure how investors would see a foreigner setting up a us company he can’t run without their investment (risk coming from gov ineptitude is not something anyone likes)

noloblo• 5 years ago

email me

thegypsyking5• 5 years ago

Will do!

cmehdy4• 5 years ago

I'm confused by this comment,

(1) because you're hoping to know how a 20-something year-old led millions of dollars' worth of scams, to... emulate it?

(2) because you feel stuck as somebody working at a FAANG (I know it might just be another wednesday for some HN users but I'll remind them that faang work still remains the 1% for the plebs not graced by "that" touch)

There are ways to find inspiring leaders that don't involve them spending nearly a decade in prison. For one, thorough discussion with interesting people (people you deem interesting probably are, you made it to a faang) of all ages (success in youth is lovely but unless you bet on chance being on your side you might want to broaden your horizons), and accepting that leadership takes many shapes - not just the ones that make the bad kinds of headlines.

I'm not your target audience though, and probably just ruminating helplessly as an answer to your message fishing for future investors - apologies.

manigandham2• 5 years ago

What's confusing? They clearly said they wanted to "start a hedge fund on wall street ... legitimately" which is entirely valid and something others have found success in.

Why did you still assume their intention was to scam? And what does any of this have to do with finding leaders?

Ballas• 5 years ago

He is from Australia, so they have access to the E-3 visa [0], which is a lot easier to get than most of the others. That is not to say that it is the visa he is on, I just wanted to highlight the possibility.

[0] https://en.wikipedia.org/wiki/E-3_visa

thegypsyking5• 5 years ago

Yes, I figured that’s most likely it as well.

shapefrog6• 5 years ago

is a 24-year old Australian national. According to its public marketing materials, Virgil Sigma has been profitable in every month from August 2016 to the present

So 24 now, in 2017 investors gave a 100mil to invest in crypto on the say so of a 19 year old who said they make money every month. Honestly not sure who the is the bigger bad guy in all this, the scammer or the scammed.

H8crilA2• 5 years ago

The key in every speculative bubble is to remember that you must exit, or you'll be the one holding the bag.

(I hate scammers like this guy, but the comparison is valid, I think)

quantumBerry5• 5 years ago

How do I know if I'm in a speculative bubble?

WalterBright6• 5 years ago

The key to making money in the stock market it so buy high sell low. Or the other way around. I never remember which it is.

paulgb• 5 years ago

Virgil Sigma and VQR

References to Two Sigma and AQR, I guess?

ScottMann• 5 years ago

The scammers get more creative every day. What I want to know is how an individual can be certain their crypto is safe? And how does one get their money back?

That is my biggest concern with my crypto wallet.

AQuantized• 5 years ago

To be totally safe you need to hold in 'cold storage,' totally offline. Unless the feds intercept someone in the act of scamming/stealing crypto and negotiate the crypto back into your hands, it's incredibly unlikely you will ever get your money back.

ryanSrich2• 5 years ago

Buy a ledger https://www.ledger.com/

WalterBright6• 5 years ago

Interactive Brokers just announced they are going to start trading crypto. If they trade it like stocks, then they hold the crypto for you. This would make it as safe as them holding the stocks in your brokerage account.

mensetmanusman2• 5 years ago

I seriously wonder how you differentiate between real crypto and a Ponzi scheme.

By definition, Ponzi scheme’s, like musical chairs, do work as long as people keep playing.

davidw2• 5 years ago

"The only winning move is not to play". I guess you might miss out on something, or miss out on making a tidy profit off a Greater Fool, but the peace of mind is worth it.

quantumBerry5• 5 years ago

That only works if you have no wealth. If you have any wealth, you should diversify it. Only a fool would dump all their money into crypto, but also only a fool would put all their eggs into the basket of unbacked fiat. You're just picking which game to play, and hoping you play enough games with even enough odds that you don't lose too many at once.

smabie5• 5 years ago

I mean you could say the same things about any sort of investment that isn't risk-free (which is basically all investments that earn a return nowadays). I don't see anything fundamentally different about crypto than any other asset really.

ryanSrich2• 5 years ago

The problem with this is that even a well meaning and useful piece of technology will be called a scam and ponzi if they have a coin. Look at the layer one chains, ETH, SOL and AVAX. Are these ponzis?

phaemon2• 5 years ago

By learning what they are. It's not that difficult. A pyramid scheme of any sort requires new participants continually. Crypto currency does not.

ABeeSea3• 5 years ago

Whales depend on new money entering to keep the price from plummeting. I used to think of crypto’s as a decentralized ponzi where all the participants are incentivized to bring in as many new participants as possible. They’ve cut this part out and just decided to go with making fake money out of tether to prop up the price.

sentinel2• 5 years ago

Crypto is a catch-all term at the moment. Some cryptos will be more useful than others. Some (like BTC) could be the digital equivalent of gold. Some will facilitate decentralized companies (e.g. LINK). Some will likely be Ponzi schemes (e.g. dogecoin).

cliftonk• 5 years ago

Hard to understand the distinction between bitcoin and dogecoin using that logic. Both are PoW systems that can only do one thing: transfers.

s-lambert• 5 years ago

The "digital equivalent of gold" is nonsense though, WoW gold is the "digital equivalent of gold" too.

thaumasiotes5• 5 years ago

By definition, Ponzi scheme’s, like musical chairs, do work as long as people keep playing.

This is not correct. You have to maintain a very particular ratio of new investments to redemptions in order for a Ponzi scheme to be stable. (The amount of money invested in a given period must equal or exceed the amount of money redeemed.) If that doesn't happen, which will almost always be true, you will flame out despite the fact that people are still playing.

mensetmanusman2• 5 years ago

But if the players of the Ponzi scheme are invested over many years, it’s still a ponzi, e.g. see Madoff. A slow moving ponzi looks different than a bank run.

His schemes lasted longer than crypto had been around for the general public.

WalterBright6• 5 years ago

Ponzi schemes require an exponential increase in the number of participants to remain viable. Bitcoin does not.

DennisP• 5 years ago

At this point Ethereum has a bunch of applications on top with quite a bit of demand, and you need ETH to pay the transaction fees, a portion of which are burned. Once proof-of-work is discarded early next year, the supply will start shrinking, and it'll be possible to value ETH like shares in a company doing stock buybacks. So I'd say that doesn't look much like a Ponzi scheme.

beervirus• 5 years ago

Lol you had me going for a minute there.

lostmsu• 5 years ago

A Ponzi scheme requires creators/beneficiants to actively work on inviting new people by the virtue of simple advertisement. Most of creators/beneficiants of widely used cryptocurrencies do not do that.

manigandham2• 5 years ago

Ponzi schemes require returns, and more specifically the source these returns being the newly invested funds rather than actual trading/investing activity that becomes the scam.

A crypto security on its own doesn't guarantee or promise returns, and gaining value because of other people buying in is no different than company stock also rising in price because of demand. That's just how trading works. The potential issue is if people bought in because of misleading or false details rather than public information.

tzm• 5 years ago

By definition, Ponzi scheme’s, like musical chairs, do work as long as people keep playing.

A shared heuristic, not a definition. You pretty much defined economic participation or confidence in any monetary system (applicable to all markets).

aml183• 5 years ago

I was the other person profiled in the WSJ article they referenced. I remember when the article came out and I was like, "wow those are some impressive returns."

Sad to see that he was stealing. I think we will see more of these cases. There was a ton of very "shady" behavior in the industry. Regulators are only scratching at the surface.

https://www.wsj.com/articles/bitcoins-crashing-that-wont-sto...

croes• 5 years ago

"Crypto Fund Manager/Scammer" reads like they are synonyms.

smabie5• 5 years ago

I mean not really? There's plenty of firms who are trading crypto at this point. A lot of tradfi firms have entered the space as well.

janmo3• 5 years ago

It would make a great "American Greed" episode. He got lucky, 7 years is rather on the low end. Usually for running a ponzi scheme this big in the US you get at least 15 years.

smabie5• 5 years ago

some red flag:

1. if you're making 600% annualized you don't take outside investors, you prop trade for your own account.

2. He's very young and didn't have any trading pedigree: normally you would expect someone like this to be ex-js/citsec/etc

3. Sometimes lavish life style can be a give away: often the real rain makers are pretty frugal.

4. Related to 2, but if you're gonna take outside investors for some reason and you're printing like that, you sure as hell aren't gonna take it from random individual. You would raise money from one or a couple big firms or possibly a ultra hnw individual.

mmmmkay• 5 years ago

I've been beating the market for a few years now (not 600% annualized of course). It's harder to find capital than you think it is. But, then again, I guess you're right. In order to consistently beat the market I've focused on beating the market and not trying to raise funds, so maybe that's why I've been able to do it. Kind of a catch-22.

smabie5• 5 years ago

Yeah it really depends on the asset class. A buddy of mine runs a small LS equity fund and it's been hard for him to grow his aum, even though he's been producing at least 5% alpha annualized for over 5 years.

On the other end of the spectrum is crypto, in which it is frighteningly easy to raise >10 figures at the snap of your fingers.

andreareina• 5 years ago

The 600% annualized is an important part of that: if you started with $1000 you'd need only four years to hit a million. Four more and it's a billion.

ljm• 5 years ago

8 years in jail for securities fraud (embezzlement, it seems). Easy to lay against one guy acting by himself.

Maybe if he put the money into cheap mortgages and loans he'd get a government bailout instead. Play the game like the big guys do.

(The point being, you grow to be less accountable)

WalterBright6• 5 years ago

in February 2018, QIN and his fund were profiled in the Wall Street Journal.

Sad that the financial press didn't smell a rat. I suppose if they were that savvy, they'd be making money on the street rather than working as journalists :-/

mhh__• 5 years ago

The good ones can end up working up for wall street firms anyway. Guess the former career of the person who does our media training

nobrains• 5 years ago

So he probably has some blue-chip cryptocurrency (BTC, ETH, etc.) hidden away. 24 years + 7 years prison = He will be 31 years old when he is out, and likely a millionaire with that hidden cryptocurrency, at today's prices, and likely a billionaire if cryptocurrency price rises keep similar returns to previous years.

He wins.

mths• 5 years ago

[Insert obligatory acknowledgement of my privilege], but I like to think I wouldn't have sold my mid to late 20s for a couple of billion USD, given the choice.

syspec• 5 years ago

QIN, 24, was also sentenced to three years of supervised release, and ordered to forfeit $54,793,532. Geeze, so crime does pay as it is likely he's keeping some of the money he made by using the stolen money to invest in other things such as real estate, or some BTC / ETH he was able to hide from investigators

Founder of $90M cryptocurrency hedge fund sentenced to seven years in prison

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