The crypto community has received word of yet another law enforcement activity against someone who may end up looking like a Bernie Madoff character in the cryptocurrency world.
Coindesk reports the U.S. Securities and Exchange Commission has obtained an emergency asset freeze on Virgil Capital, a firm run by Stefan Qin.
Leaders at Virgil Capital are facing accusations of “fabricated records” and an attempted extraction of $1.7 million from an investment pool of around $3.5 million that seems like an improper use of funds.
An SEC press release cites “material misrepresentations” by Qin and crew and claims Qin misled investors by claiming that the money would only be used for cryptocurrency investment, when in fact it was being siphoned out for other projects.
“This emergency action is an important step to protect investor assets and prevent further harm,” Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, told the press. “Qin allegedly made false promises to lure investors and then continued his deception to conceal his misuse of investor funds.”
The Virgil Capital case is different from some of the turbulent activity around exchanges like BitMex and OKEx, though leaders at both of those exchanges have been cuffed by federal agents over their financial activities.
Unlike these other enforcements, the Virgil Capital case seems to be a simple case of defrauding investors in ways that don’t have much to do with cryptocurrency in general. In other words, it’s not the asset handling itself that’s a problem, it’s the misappropriation of funds, which could occur in any denominated asset class, though fiat or crypto.
In still, it’s important for investors to keep tabs on various kinds of enforcement activity around cryptocurrency, to understand how it changes the sector. For example, Bitcoin is on a wild rally right now that’s making its prior 2018 highs look like child’s play. But we could see some of that enthusiasm dampened if fraud and money laundering concerns become prominent.