The U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) have charged Ohio-based businessman Michael Ackerman and two unnamed business partners with fraudulently soliciting over $33 million from 150 investors to trade digital assets and misappropriating a substantial amount of that total.
What has happened?
The SEC and CFTC allege that from 2017 to 2019 Ackerman and his business partners, through companies he controlled, Q3 Trading Club and Q3 I, LP, ran a fraudulent scheme offering investors the opportunity to pool money to invest in cryptocurrencies.
What does this mean?
According to the SEC press release, Ackerman claimed he had developed a proprietary algorithm that allowed him to generate "extraordinary profits" while trading in cryptocurrencies. Physicians in particular invested in the Q3 companies when they were introduced to the scheme by one of the business partners who is also a physician.
Ackerman allegedly misled investors about the performance of his digital currency trading, his use of investor funds and the safety of investor funds in the Q3 trading accounts.
"However, less than $10 million of the $33 million in Q3 customer funds was wired to virtual currency exchanges. Instead, [the] Defendants transferred more than $25 million of Q3 customers’ funds to personal bank accounts of Ackerman and the two other individuals with whom Ackerman founded Q3. Ackerman himself received more than $7 million of Q3 customers’ funds", the CFTC said in its complaint.
To conceal the fraud, the defendants allegedly gave customers false accounting statements, newsletters containing false trading returns and fictitious screenshots of the amount of money under Q3's management.
The SEC is charging Ackerman with violations of the antifraud provisions of the federal securities laws and is seeking a permanent injunction, disgorgement plus pre-judgment interest, and a civil penalty.
The CFTC is seeking civil monetary penalties and remedial ancillary relief including trading and registration bans, restitution, disgorgement, rescission, pre- and post-judgment interest, and such other relief as the court deems necessary.
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