(Reuters) - The U.S. Securities and Exchange Commission has sued a 23-year-old Australian hedge fund founder in Manhattan federal court for allegedly defrauding investors in his $92.4 million cryptocurrency arbitrage fund.

Stefan Qin, founder of Virgil Capital, allegedly fabricated records, failed to redeem $3.5 million in investments and sought to withdraw $1.7 million in investor funds to pay off Chinese loan sharks, the SEC said in the lawsuit filed on Tuesday. The SEC has asked U.S. Judge Lorna Schofield for an emergency order freezing $25 million in digital assets held by another Qin-controlled fund.

Sean Hecker and Shawn Crowley of Kaplan Hecker & Fink, who represent Qin, said in a statement on Wednesday that he intends to fully cooperate with the regulator to provide a "fulsome set of facts" and is "committed to ensuring that no investors are harmed."

He "knows that the firm has the capital necessary to respond to any requests for transfers or redemptions," the statement said.

Qin founded the New York-based hedge fund at age 19, selling the Virgil Sigma Fund to investors as a fund that used a proprietary arbitrage trading strategy to profit off differences in cryptocurrency and digital asset prices on exchanges worldwide, the SEC said.

According to the complaint, Qin falsified a spreadsheet tracking Sigma investments at 39 cryptocurrency trading platforms last year. The document listed average monthly holdings of $2 million throughout 2019 at Kraken, Coinbase and Gemini, three large U.S.-based cryptocurrency exchanges, though none of Sigma's accounts at those exchanges traded or held assets last year, the SEC said.

The agency further claimed that, starting in mid-2020, Qin told investors who sought to redeem investments totaling $3.5 million that their funds would be moved to the VQR Multistrategy Fund, though the funds were ultimately not transferred.

In December, Qin asked VQR head trader Antonio Hallak to help him withdraw $1.7 million from that fund, stating that he had borrowed money from Chinese loan sharks to invest in Sigma, according to a declaration by Hallak filed in the case.

"They've been patient for three months," Qin told Hallak, according to the filing. "They might do anything to collect on the debt."

The case is SEC v. Qin, U.S. District Court, Southern District of New York, No. 20-cv-10849.

For the SEC: Fitzann Reid, Amanda Straub, Steven Buchholz and Susan LaMarca