In doing so, GENOVESE represented, among other things, that he was part of the Genovese family that had owned the Genovese Drug Store chain in the New York area and was an heir to this family’s fortune from the sale of that business for hundreds of millions of dollars in the late 1990s; that he had graduated from Dartmouth College’s Tuck School of Business; and that he had extensive Wall Street experience. In particular, GENOVESE claimed that he had been a Goldman Sachs partner and a Bear Sterns portfolio manager before forming Willow Creek. Based in part on these claims, victims invested $11,211,704 with GENOVESE.
These representations were false. GENOVESE is not related to the Genovese family that owned and sold the Genovese Drug Store Chain, did not attend the Tuck School of Business, and had never worked for Goldman Sachs or Bear Stearns.
REPKE was sentenced to 10 years in prison to be followed by five years of supervised release. REPKE was convicted of these charges on December 21, 2011 upon his plea of guilty. JEFFERY was sentenced to seven years and three months in prison to be followed by five years of supervised release.
JEFFERY was convicted of these charges on April 12, 2011 upon his plea of guilty. Both defendants were ordered, jointly and severally, to pay $29,740,180 in restitution to over 200 victims.
According to United States Attorney Yates, the charges, and other information presented in court: REPKE and JEFFERY operated Coadum Capital from 2005 through early 2008, which at its height attracted nearly 250 investors and nearly $40 million in investments. Coadum offered shares in hedge funds and advertised monthly returns often exceeding 5 percent.
Qin’s investors soon discovered that his strategies weren’t much more than a disguised means for him to embezzle and make unauthorized investments with client funds. When faced with redemption requests he couldn’t fulfill, Qin doubled down on his scheme by attempting to plunder funds from VQR to satisfy his victim investors’ demands. Qin’s brazen and wide-ranging scheme left his beleaguered investors in the lurch for over $54 million, and he has now been handed the appropriately lengthy sentence of over seven years in federal prison.”
According to the Information and statements made in open court:
STEFAN HE QIN is a 24-year old Australian national.
Between 2017 through 2020, QIN owned and controlled two cryptocurrency investment funds, Virgil Sigma and VQR, both of which were located in New York, New York.
Blotnick was also sentenced to two years of supervised release.
The federal sentence may not be the only prison time he gets. According to court records, Blotnick pleaded guilty in October to similar charges brought by the Manhattan district attorney’s office. He faces a possible state court sentencing on Thursday.
Kaufmann said Blotnick is expected to get a sentence of one to three years on the state charges, to run concurrent with the federal term.
The case is US v.
Blotnick, 21-cr-796, U.S. District Court, District of New Jersey (Newark.)
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Audrey Strauss, United States Attorney for the Southern District of New York, announced that STEFAN HE QIN, the founder of the Virgil Sigma Fund LP (“Virgil Sigma”) and the VQR Multistrategy Fund LP (“VQR”), a pair of cryptocurrency hedge funds in New York which claimed to have over $100 million dollars in investments, was sentenced today to 90 months in prison. On February 4, 2021, QIN pled guilty to one count of securities fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.
Attorney Audrey Strauss said: “According to Stefan He Qin, founder of Virgil Sigma and VQR, a pair of cryptocurrency hedge funds in New York, Virgil had a stated market strategy of ‘market neutral,’ safe investments.
BART GUTEKUNST, 63, of Weston, and a former managing partner and principal of New Stream Capital, LLC, a Ridgefield-based hedge fund, was sentenced today by Chief U.S. District Judge Janet C. Hall in New Haven to 30 months of imprisonment, followed by three years of supervised release, for engaging in a scheme to deceive investors in order to obtain and maintain investments.
According to court documents and statements made in court, in November 2007, New Stream Capital, LLC (“New Stream”) launched new feeder funds, one based in the United States (“U.S. Fund”) and a series of funds based in the Cayman Islands (“Cayman Fund”).
New Stream also announced that its existing Bermuda Fund would be closing, and all foreign investors would have to move their investments into the Cayman Fund.
QIN subsequently attempted to take control of VQR’s assets in order to enable QIN to meet certain Virgil Sigma investor redemption requests.
The Virgil Sigma fund and VQR have ceased operations and the liquidation and distribution of assets is being handled by a court-appointed receiver in the matter of S.E.C. v. Qin, 20 Civ. 10849.
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QIN, 24, was also sentenced to three years of supervised release, and ordered to forfeit $54,793,532.
Ms. Strauss praised the work of the Department of Homeland Security, Homeland Security Investigations. She further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Daniel Tracer is in charge of the prosecution.
Attorney Tompkins in making today’s announcement.
According to filed court documents and court proceedings, the defendants operated “hedge funds” as part of a $40 million Ponzi scheme operating under the name Black Diamond Capital Solutions (Black Diamond). Court documents show that from 2007 to 2010, the defendants induced their investor victims to turn over their money by claiming, among other things, that they had done due diligence on Black Diamond and were operating legitimate hedge funds with significant safeguards, when, in reality, those claims were false. Court records also show that as Black Diamond began collapsing, the defendants and others created a new Ponzi scheme and used a series of separate bank accounts administered by Davey to further the scheme.
Rather than transfer into the new structure, New Stream’s largest investor placed a redemption on its whole investment in the Bermuda Fund in March 2008. At risk of losing their largest investor, PEREIRA and New Stream managing partners David Bryson and Bart Gutekunst set in motion a scheme to secretly keep the Bermuda Fund open and give priority to Bermuda Fund investors in an effort to reverse the redemption.
As part of the scheme, PEREIRA, Bryson and Gutekunst had New Stream staff secretly execute documents to effectuate the Bermuda Fund’s special priority. New Stream failed to inform investors who had transferred from the Bermuda Fund into the Cayman Fund that the Bermuda Fund was remaining open or that it was being given priority over the Cayman Fund.
For example, in or about October 2018, QIN invested hundreds of thousands of dollars stolen from Virgil Sigma into a real estate investment; and (c) using a substantial portion of investor capital from Virgil Sigma to invest in crypto-assets that had nothing to do with the fund’s stated arbitrage strategy. For example, in or about 2018, QIN invested funds from Virgil Sigma into certain initial coin offerings, a speculative form of investing in new issues of cryptocurrency. As a result of these and other fraudulent activities, QIN dissipated nearly all of the investor capital in Virgil Sigma.
QIN also regularly lied to the fund’s investors about the value, location, and status of their investment capital, including through false account statements that QIN prepared and bogus tax documents that he circulated to his investors.
Most of these funds are used for personal expenses such as groceries and penthouses in New York.
Qin also deceived investors in his VQR fund, which “employs a variety of trading strategies and is willing to make or lose money based on fluctuations in the value of cryptocurrencies and is not market neutral. Qin is the sole owner of VQR, already in December 2020, the multiple redemption requests of the fund could not be fulfilled. Qin did this by investing capital from Virgil Sigma into personal accounts to be used for purposes other than the purported arbitrage trading strategy.
The majority of these funds were used for personal expenses such as food and a New York Penthouse apartment.
The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For further information please contact the U.S. Attorney’s Public Information Office at [email protected] or (404) 581-6016.
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