Digital Assets: Former NYSE Institutional Broker Charged and Arrested for Alleged Crypto Fraud

February 12, 2020 | Digital Assets, News
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Michael Ackerman and two of his vehicles, Q3 Holdings, LLC and Q3 I, LP, are charged with alleged fraud and misappropriation of digital assets.

The Commodity Futures Trading Commission announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York against defendants Q3 Holdings, LLC and Q3 I, LP and their principal, Michael Ackerman. (mondovisione)

Separately, the U.S. Attorney’s Office for the Southern District of New York announced the arrest of Ackerman on one count of wire fraud and the Securities and Exchange Commission announced the filing of a multi-count complaint against Ackerman and Q3 alleging securities fraud and misappropriation.

SEC’s complaint

Michael Ackerman allegedly raised $33 million in a fraudulent crypto trading scheme. Further, Ackerman and his two partners misled investors by claiming they had developed an extraordinarily profitable crypto trading algorithm. One of the partners was a doctor. (CrowdFundInsider)

According to the SEC, around 150 investors, including many in the medical fraternity, lost money in the alleged fraud. The perpetrators floated Q3 Trading Club and Q3 I LP – two entities that enabled the digital currency investment offering.

The SEC also alleged Ackerman used most of the money raised from the hapless investors to buy jewelry, cars, and to purchase and renovate a house.

Moreover, he lied to investors about the profitability of his trading, the status of the funds and their safety.

He “doctored” computer screenshots of trading accounts to give a false impression that they held as much as $310 million.

“Ackerman exploited popular interest in digital assets as a means to obtain millions of dollars for his personal use,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.

CFTC’s complaint

The CFTC also filed a civil enforcement action against Ackerman and his companies. The charges included many false representations including:

  • earning customers 0.5% in daily trading profits and about 15% per month,
  • using algorithms that generated winning trades 75% of the time, and
  • utilizing security measures that made it impossible for the transfer or withdrawal of customer funds

“This case underscores, once again, that the Commission will continue working with our regulatory partners to ensure the integrity of our markets, including those involving digital assets,” said CFTC Director of Enforcement James McDonald. “Rooting out misconduct is essential to furthering the responsible development of these innovative financial products.”

Related Story:   Digital Assets: Founding Duo of Zima Digital Assets Arrested In $7.5M Criminal Complaint   

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