Crypto Fraud Leads To Prison

Stephen He Chen, who managed a $90 million hedge fund, was sentenced with the aid of the Southern District Court in New York to 90 months in jail for defrauding its investors.

He was also ordered to confiscate about $54.8 million.

The verdict used to be issued on Wednesday, after Chen pleaded responsible to a securities fraud offense in the past in February after being indicted via the US Securities and Exchange Commission (SEC) at the cease of remaining year.

Fraudulent crypto fund: Chen owned and operated two crypto hedge funds, Virgil Sigma and VQR, between 2017 and 2020.

He at the start contacted buyers saying that he was once the usage of an arbitrage approach to earn income from the cryptocurrency markets, which he described as being risk-resistant.

Chen claimed that Virgil Sigma was once the first hedge fund he opened, and that it has made profits each and every month because August 2016, with the exception of March 2017.

These allegations and lies have helped him raise up to $90 million in assets below the administration of this fund.

The “VQR” fund was once set up in February 2020, and unlike the different fund, it has been following an active buying and selling strategy in the cryptocurrency market, which potential making income from market fluctuations.

This fund additionally raised about $24 million from investors.

After fabricated allegations and lies, Chen began defrauding Virgil Sigma fund buyers in 2017, according to authorities.

The fraudster used a large phase of the investors' money to cover non-public costs and also used the proceeds to without delay invest in cryptocurrency markets such as Initial Coin Offerings (ICOs).

In December 2020, he closed all market positions with VQR money at a loss for using the money allegedly for redemptions of Virgil Sigma fund investors.

But Chen's buyers soon observed that his strategies were nothing extra than a tactic and a lie that he used to embezzle and make unauthorized investments in clients' money.

US Attorney Audrey Strauss stated that when confronted with unfulfilled redemption requests, Chen doubled down on his format by way of attempting to loot cash from the VQR fund to meet the needs of victim investors.

She added:

Chen's brazen and far-reaching scheme has left his beleaguered traders on the cusp of extra than $54 million, and he has now been sentenced to an accurately lengthy prison sentence of extra than seven years in federal prison.