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A 24-year-old founder of two cryptocurrency hedge funds has pleaded guilty to securities fraud worth about $90 million.

The U.S. Department of Justice announced the news on Thursday, saying that Stefan He Qin, founder of New York-based Virgil Sigma Fund and VQR Multistrategy Fund, duped investors by stealing their capital.

Virgil Sigma was advertised as an arbitrage opportunity fund and had over $90 million worth of assets under management. VQR, on the other hand, employed different trading strategies and had at least about $24 million worth of investor funds.

Qin drained almost all of Virgil Sigma’s assets and spent it on indulgences, and speculative personal investments, said U.S. Attorney Audrey Strauss.

He then attempted to steal money from VQR to meet the redemption demands of the defrauded investors in Virgil Sigma, said Strauss, adding: “The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery.” The fraud occurred between 2017 through 2020.

Qin now faces up to 20 years in prison when he is sentenced on May 20.

Last December, the U.S. Securities and Exchange Commission also filed a parallel civil case against Qin. The agency at the time obtained an asset freeze order against Virgil Sigma Fund.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Flash lending allows Ethereum users to get capital for any action as long as they return these tokens to the liquidity pool at the end of the transaction.
• The most beneficial flash loan provider is dYdX, which allows borrowers not to pay a fee for the use of funds.
• While Aave is most commonly associated with flash loans, it is used less frequently than its competitors and is likely only due to its easy integration.
• Uniswap v2 flash swaps produced $7.5M fees for liquidity providers due to multiple DeFi attacks.

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Global consulting giant EY is partnering with the Blockchain Service Network (BSN) to expand its Ethereum-based OpsChain to the Chinese market.

The firm said in an announcement on Friday that it plans to offer its EY OpsChain to developers in China via the Blockchain Open Source (BCOS) enterprise network that runs on the China state-sanctioned BSN as well as via the “localized” version of Ethereum that is set to be integrated with the BSN.

The BCOS is an open-source enterprise blockchain rolled out by the Financial Blockchain Shenzhen Consortium (FISCO), a joint effort by a range of Chinese technology firms including Tencent and Huawei.

It has been integrated with the BSN, which is a centralized infrastructure that allows developers to build decentralized apps on top of both public and permissioned blockchains that it supports, like Hyperledger Fabric, Ethereum, and Polkadot, etc.

The expansion plan comes months after EY launched OpsChain, an Ethereum-based procurement solution for enterprises designed to convert procurement agreements into blockchain smart contracts.

EY said OpsChain will be its first solution deployed on the BSN and it will use the platform to complete the integration and deployment of EY Blockchain Analyzer for blockchain analytics and financial statement audit.

“By offering both FISCO BCOS and Ethereum, EY professionals will serve clients within China and across the Asia-Pacific region and connect those users to the global blockchain. I see this as a key step forward in connecting the world’s largest economies through blockchain technology,” Paul Brody, lead of EY Global Blockchain, said in the announcement.

However, to cater the Chinese regulation with a known yes-blockchain-no-crypto policy, EY’s OpsChain will initially be available on a “localized” version of Ethereum on the BSN in China subject to regulatory approval. 

The BSN was previously reported to localize 24 public blockchains so that it can meet the regulatory environment in China. In essence, these localized versions can be seen as a hard-fork of the original network but will substitute crypto-based gas fees with Chinese yuan so that end users will not be dealing with crypto assets when making transactions.

According to a blog post on February 1, the BSN has completed the first batch of localization, which is an open permissioned COSMOS that runs in parallel to the public cross-chain COSMOS network.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Senate has assigned pro-bitcoin senator Cynthia Lummis (R-WY) to the Banking, Housing and Urban Affairs committee, and she’s already planning on ways to educate her colleagues on digital assets.

“Through my role on the Banking Committee, I hope to shine a light on many of these pioneering efforts and work with federal regulators to ensure that regulation of digital assets are structured to encourage innovation, instead of stifling it,” she said about her appointment. “I also look forward to providing regulatory relief to our community banks and ensuring that we have vibrant, safe financial markets.” 

Lummis expressed her intention to educate her fellow senators. On Anthony Pompliano’s podcast, Lummis announced that she’s forming a financial innovation caucus in the Senate to promote “a proper understanding and responsible regulation of things like digital assets and emerging financial technologies,” according to her office.

She also touted bitcoin as a better store of value for consumers, particularly as a hedge against the dollar. Lummis herself is the first sitting senator known to hold the asset. 

The proposed caucus would seek to counter the argument that cryptocurrencies are primarily a money-laundering tool, in order to create more space for innovation in the U.S., according to Lummis. She specifically mentioned stablecoins as one such area of innovation, referencing both the Facebook-backed stablecoin project Diem and the Federal Reserve’s interest in a possible central bank digital currency (CBDC). To that end, the caucus plans to meet with the Fed. 

Lummis has already started meeting with regulators on behalf of digital asset innovation. She told The Pomp Podcast that she’d already had a phone conversation with Treasury Secretary Janet Yellen, saying she sensed the Treasury Secretary has an open mind with balanced skepticism when it comes to digital assets. Yellen made similar comments in her written testimony for her Senate confirmation.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.