- Virgil Capital was thought to be a cryptocurrency hedge fund posting phenomenal returns
- Instead it was a Ponzi scheme set up by a 19-year-old college dropout
- Virgil Capital founder Stefan Qin now faces 14 years in prison for the $90 million fraud
Fortune magazine has lifted the lid on Virgil Capital, a fraudulent cryptocurrency fund run by then teenager Stefan Qin, who recently pleaded guilty to charges of securities fraud. Qin ran Virgil Capital from 2016 to 2021 and while it may have begun as a legitimate crypto hedge fund it soon turned into a Ponzi scheme, with Qin stealing from his own funds to pay out others. Now he faces 14 years behind bars for his actions.
A Familiar Crypto Story
The story of Virgil Capital emulates the experiences of hundreds of amateur cryptocurrency hedge funds that sprouted while the going was good in 2016/17 and then folded in tougher times, with the difference that Virgil Capital was run by a 19-year-old. Australian national Qin labeled himself a math prodigy and dropped out of college in 2016 to form Virgil Capital in New York, where he took deposits and claimed to have traded his way to a 500% gain in less than a year using a self-built arbitrage algorithm.
A profile in the Wall Street Journal in February 2018 gave him an unexpected boost and saw the deposits flow in, bringing in some $90 million in total. This allowed him to live a lavish lifestyle which included a $23,000-a-month apartment in lower Manhattan with a pool, sauna, steam room, and golf simulator. He was also posting great results, despite the crypto bear market kicking in.
Virgil Capital Collapses
On the surface everything appeared rosy, but the foundations were cracking. In truth, Virgil Capital was a mammoth Ponzi scheme, with new investment paying out withdrawals. Cash flow problems in December last year led to Qin draining a supplementary fund of $3.5 million to pay out withdrawals from Virgil Capital.
Qin was eventually brought to book earlier this year, pleading guilty to one charge of securities fraud, with a plea deal likely to earn him a 14-year prison sentence as opposed to a maximum 20-year sentence along with a $350,000.
All that now remains of Virgil Capital is approximately $24 million in assets which will be sold and returned to investors, a far cry from the $90 million they sent him. Qin himself is apparently keen to continue crypto trading when he is released from prison, although what the Bitcoin price will be when that moment comes can only be guessed at.