The Commodity Futures Trading Commission (CFTC) has announced the filing of a civil enforcement action in New York against defendants Q3 Holdings and Q3 I, and their principal, Michael Ackerman, for allegedly fraudulently soliciting over $33 million to purportedly trade digital assets and misappropriating a substantial portion of that total.
In a separate action, the US 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.
The complaint specifically alleges that from at least August 2017 through December 2019 the defendants operated a fraudulent scheme in which they solicited funds to purportedly trade digital assets and then misappropriated those funds. The defendants engaged in numerous misrepresentations that included making claims of earning customers .5% in daily trading profits and roughly 15% per month; using algorithms that generated winning trades 75% of the time; and utilising security measures that made it impossible for any principal to transfer or withdraw customer funds.
In reality, CFTC says the defendants sent only a small portion of the customers’ funds to digital asset trading accounts, did not earn the trading profits they claimed, and misappropriated funds. To conceal the fraud, the defendants provided customers with false accounting statements, newsletters containing false trading returns, and fictitious screenshots reflecting the amount of money under Q3’s management.
“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,” says CFTC director of enforcement James McDonald. “Rooting out misconduct is essential to furthering the responsible development of these innovative financial products.”