11 ms·

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

127 points by clpm4j 5y ago

ProjectArcturis 5y ago
Looks like a pretty standard Ponzi scheme, just that he claimed to be making money with some kind of crypto arb.
- p1necone 5y ago
  With unregulated crypto everything old is new again. There's ponzi schemes and pump and dumps everywhere.
eaenki 5y 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?
- shapefrog 5y 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 5y 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.
    - bostonsre 5y ago
      He could move to a country with no extradition agreement with the US.
      - xyzzyz 5y ago
        Which of these countries one can easily move to? Most countries have relatively strict immigration policy, and if your plan is to overstay tourist visa, they might just deport you home, despite no extradition agreement.
        stevespang 5y ago
        It's common knowledge Russia has no extradition agreement with the US and if you are willing to spy for the Russian Gov't or hack for them they will likely trade you a start to citizenship . . . I mean Edward Snowden is the perfect example
        quantumBerry 5y ago
        No one is going to give you advice on how to break the law, but a google search doesn't come up dry on nations full of illegal immigrants that tend to be overlooked unless they commit some grave crime or have a very serious political enemy. It's also worth knowing that strict immigration law and power of the government to enforce it don't really go hand in hand in many shitty 3rd world countries, and in some countries the law really only extends to bigger cities where federal police have power.
        xyzzyz 5y ago
        My point is that if your plan is to fly under the radar, existence or lack of extradition agreement with US is not really relevant: if you immigrate illegally to escape prosecution, lack of extradition agreement won’t help you much, because if US finds you there and asks for you back, most countries will deport you for breaking immigration laws, without even involving extradition process.
        bostonsre 5y ago
        I'm sure he can find somewhere with less scrupulous officials that he could bribe for some official documentation.
    - janmo 5y ago
      He could launder the money, and start over again. Not that hard. People also tend to forget and in 7 years no one will remember him. He could also go to another country after his release or just disappear. Many cases where people have run away with millions or even billions and are nowhere to be found: - Ruja Ignatova (OneCoin) - Jan Marsalek (Wirecard) - Gerald Cotten and Omar Dhanani (QuadrigaCX) I like this one. It is obvious that Gerald faked his death and that Omar is putting everything on his "dead" friend. So getting away with something like that is not impossible at all. In fact if you have millions it is quite easy it seems.
      - GDC7 5y ago
        > In fact if you have millions it is quite easy it seems People want to make millions to enjoy them and spend them. Basically no merchant accepts crypto and the crypto for cash schemes are not equipped to convert huge amount of money. The only ones who could exchange hundreds of millions or billions in BTC for cash are the cartels or their clients in USA/Europe/Asia. These people are white collar crime type individuals, if they try to reach them the aforementioned organizations would quite literally mop the floor with them.
        quantumBerry 5y ago
        If you're 40 years old you may have 15,000 days left. If you're in hiding you're probably not looking to buy property or anything registering your assets. I can't imagine it'd be that difficult to cash out a few hundred a day in some place like Argentina which has lots of non-KYC ATMs and folks exchanging crypto. A few hundred a day is plenty enough to live the rest of your life in luxury, if crypto in whatever stable coin you're able to hold doesn't completely crash. Remember 10 million is a lot of money, but that's really only like 700 dollars a day for 40 years. Basically enough for a luxury hotel, great meals, and a nice hooker at the end of the night every single day.
        shapefrog 5y ago
        Only a luxury hotel, great meals, and a nice hooker each day for the rest of your life.
thegypsyking 5y 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.
- shapefrog 5y ago
  EB-5 Immigrant Investor Program - all it takes is 1mil usd and you are in.
  - pvarangot 5y 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.
    - yardie 5y ago
      It’s still 500k to invest in poor locations. Unless I’m out of date and that has changed as well
      - csomar 5y ago
        If I remember correctly, some fancy places in New York are eligible for the 500k exemption. Might check that!
        tim333 5y ago
        I think they used a gerrymandering type argument that the fancy place was part of an area including a bunch of poor folk. The drawing of the area was kind of creative. It was taking the piss slightly but they got away with it.
      - thoughtstheseus 5y ago
shapefrog 5y 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.
- H8crilA 5y 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)
  - quantumBerry 5y ago
    How do I know if I'm in a speculative bubble?
    - H8crilA 5y ago
      You don't, at least not for sure. That's the reason why they exist in the first place, otherwise they couldn't really gain speed.
    - deleted 5y ago
      [deleted]
    - nostrademons 5y ago
      You are for sure, in the sense that life is a speculative bubble that'll eventually end in the heat death of the universe, and your exit is foreordained. If you're looking for more actionable advice, it may be worth comparing the expected lifetime of the speculative bubble to your lifetime. Certain speculative bubbles - like the stock market, or fiat currency, or the U.S.A, or life on earth - have a fairly high chance of outliving you. Other speculative bubbles - like Solana, or $GME, or Clover Health - will probably be gone in a year or two. In between are stuff like more established cryptocurrencies (BTC and ETH), tech stocks, Silicon Valley real estate, etc. which might last for a few decades, long enough to raise children, but will likely be gone before your death. As a couple general rules, the faster they rise, the harder they fall, and the longer something has been around, the longer it is likely to continue to be around. Huge profits can be made identifying the new invention that sticks around for decades, or cashing out of the institution that's about to collapse, though.
paulgb 5y ago
> Virgil Sigma and VQR References to Two Sigma and AQR, I guess?
ScottMann 5y 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 5y 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.
- ryanSrich 5y ago
  Buy a ledger https://www.ledger.com/ https://www.ledger.com/
- WalterBright 5y 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.
mensetmanusman 5y 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.
- davidw 5y 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.
  - quantumBerry 5y 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.
  - smabie 5y 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.
    - davidw 5y ago
      I can be pretty sure that a diversified set of stocks, bonds, and maybe some real estate are not an outright scam, or that someone is going to make off with all of it because the whole thing is completely wild west.
      - smabie 5y ago
        Sure, there's a higher risk profile but also the payoff can be absolutely staggering. Moreover the risks aren't evenly distributed: crypto isn't a homogenous space. The risk isn't for everyone, but those that are intimately familiar with the space and practice reasonable risk management can do pretty well. There's a reason why almost all tradfi trading firms have either already entered the space or are considering it.
aml183 5y 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-stop-arbitrage-traders-from-raking-in-millions-1517749201 https://www.wsj.com/articles/bitcoins-crashing-that-wont-sto...
stevespang 5y ago
As overheard heard in the bar on a rainy night . . .Yeah, well, sorry G-men, that cool $54 mil is stashed in sealed glass bottles under 3 ft. of packed fill at an undisclosed location whereupon my release I shall uncover it and bounce outa the US to an undisclosed offshore location.
croes 5y ago
"Crypto Fund Manager/Scammer" reads like they are synonyms.
- smabie 5y 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.
janmo 5y 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.
smabie 5y 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 5y 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.
  - smabie 5y 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 5y 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 5y 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)
WalterBright 5y 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__ 5y 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 5y 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 5y 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 5y 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

127 points by clpm4j 5y ago

ProjectArcturis 5y ago

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

p1necone 5y ago
With unregulated crypto everything old is new again. There's ponzi schemes and pump and dumps everywhere.

eaenki 5y 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?

shapefrog 5y 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 5y 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.
  - bostonsre 5y ago
    He could move to a country with no extradition agreement with the US.
    - xyzzyz 5y ago
      Which of these countries one can easily move to? Most countries have relatively strict immigration policy, and if your plan is to overstay tourist visa, they might just deport you home, despite no extradition agreement.
      - stevespang 5y ago
        It's common knowledge Russia has no extradition agreement with the US and if you are willing to spy for the Russian Gov't or hack for them they will likely trade you a start to citizenship . . . I mean Edward Snowden is the perfect example
      - quantumBerry 5y ago
        No one is going to give you advice on how to break the law, but a google search doesn't come up dry on nations full of illegal immigrants that tend to be overlooked unless they commit some grave crime or have a very serious political enemy. It's also worth knowing that strict immigration law and power of the government to enforce it don't really go hand in hand in many shitty 3rd world countries, and in some countries the law really only extends to bigger cities where federal police have power.
        xyzzyz 5y ago
        My point is that if your plan is to fly under the radar, existence or lack of extradition agreement with US is not really relevant: if you immigrate illegally to escape prosecution, lack of extradition agreement won’t help you much, because if US finds you there and asks for you back, most countries will deport you for breaking immigration laws, without even involving extradition process.
      - bostonsre 5y ago
        I'm sure he can find somewhere with less scrupulous officials that he could bribe for some official documentation.
  - janmo 5y ago
    He could launder the money, and start over again. Not that hard. People also tend to forget and in 7 years no one will remember him. He could also go to another country after his release or just disappear. Many cases where people have run away with millions or even billions and are nowhere to be found: - Ruja Ignatova (OneCoin) - Jan Marsalek (Wirecard) - Gerald Cotten and Omar Dhanani (QuadrigaCX) I like this one. It is obvious that Gerald faked his death and that Omar is putting everything on his "dead" friend. So getting away with something like that is not impossible at all. In fact if you have millions it is quite easy it seems.
    - GDC7 5y ago
      > In fact if you have millions it is quite easy it seems People want to make millions to enjoy them and spend them. Basically no merchant accepts crypto and the crypto for cash schemes are not equipped to convert huge amount of money. The only ones who could exchange hundreds of millions or billions in BTC for cash are the cartels or their clients in USA/Europe/Asia. These people are white collar crime type individuals, if they try to reach them the aforementioned organizations would quite literally mop the floor with them.
      - quantumBerry 5y ago
        If you're 40 years old you may have 15,000 days left. If you're in hiding you're probably not looking to buy property or anything registering your assets. I can't imagine it'd be that difficult to cash out a few hundred a day in some place like Argentina which has lots of non-KYC ATMs and folks exchanging crypto. A few hundred a day is plenty enough to live the rest of your life in luxury, if crypto in whatever stable coin you're able to hold doesn't completely crash. Remember 10 million is a lot of money, but that's really only like 700 dollars a day for 40 years. Basically enough for a luxury hotel, great meals, and a nice hooker at the end of the night every single day.
        shapefrog 5y ago
        Only a luxury hotel, great meals, and a nice hooker each day for the rest of your life.

thegypsyking 5y 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.

shapefrog 5y ago
EB-5 Immigrant Investor Program - all it takes is 1mil usd and you are in.
- pvarangot 5y 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.
  - yardie 5y ago
    It’s still 500k to invest in poor locations. Unless I’m out of date and that has changed as well
    - csomar 5y ago
      If I remember correctly, some fancy places in New York are eligible for the 500k exemption. Might check that!
      - tim333 5y ago
        I think they used a gerrymandering type argument that the fancy place was part of an area including a bunch of poor folk. The drawing of the area was kind of creative. It was taking the piss slightly but they got away with it.
    - thoughtstheseus 5y ago

shapefrog 5y 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.

H8crilA 5y 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)
- quantumBerry 5y ago
  How do I know if I'm in a speculative bubble?
  - H8crilA 5y ago
    You don't, at least not for sure. That's the reason why they exist in the first place, otherwise they couldn't really gain speed.
  - deleted 5y ago
    [deleted]
  - nostrademons 5y ago
    You are for sure, in the sense that life is a speculative bubble that'll eventually end in the heat death of the universe, and your exit is foreordained. If you're looking for more actionable advice, it may be worth comparing the expected lifetime of the speculative bubble to your lifetime. Certain speculative bubbles - like the stock market, or fiat currency, or the U.S.A, or life on earth - have a fairly high chance of outliving you. Other speculative bubbles - like Solana, or $GME, or Clover Health - will probably be gone in a year or two. In between are stuff like more established cryptocurrencies (BTC and ETH), tech stocks, Silicon Valley real estate, etc. which might last for a few decades, long enough to raise children, but will likely be gone before your death. As a couple general rules, the faster they rise, the harder they fall, and the longer something has been around, the longer it is likely to continue to be around. Huge profits can be made identifying the new invention that sticks around for decades, or cashing out of the institution that's about to collapse, though.

paulgb 5y ago

> Virgil Sigma and VQR References to Two Sigma and AQR, I guess?

ScottMann 5y 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 5y 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.
ryanSrich 5y ago
Buy a ledger https://www.ledger.com/ https://www.ledger.com/
WalterBright 5y 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.

mensetmanusman 5y 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.

davidw 5y 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.
- quantumBerry 5y 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.
- smabie 5y 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.
  - davidw 5y ago
    I can be pretty sure that a diversified set of stocks, bonds, and maybe some real estate are not an outright scam, or that someone is going to make off with all of it because the whole thing is completely wild west.
    - smabie 5y ago
      Sure, there's a higher risk profile but also the payoff can be absolutely staggering. Moreover the risks aren't evenly distributed: crypto isn't a homogenous space. The risk isn't for everyone, but those that are intimately familiar with the space and practice reasonable risk management can do pretty well. There's a reason why almost all tradfi trading firms have either already entered the space or are considering it.

aml183 5y 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-stop-arbitrage-traders-from-raking-in-millions-1517749201 https://www.wsj.com/articles/bitcoins-crashing-that-wont-sto...

stevespang 5y ago

As overheard heard in the bar on a rainy night . . .Yeah, well, sorry G-men, that cool $54 mil is stashed in sealed glass bottles under 3 ft. of packed fill at an undisclosed location whereupon my release I shall uncover it and bounce outa the US to an undisclosed offshore location.

croes 5y ago

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

smabie 5y 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.

janmo 5y 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.

smabie 5y 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 5y 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.
- smabie 5y 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 5y 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 5y 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)

WalterBright 5y 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__ 5y 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 5y 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 5y 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 5y 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