The U.S. Securities and Exchange Commission (SEC) charged an Ohio-based businessman for allegedly orchestrating a digital asset scheme that defrauded approximately 150 investors, including many physicians.
In the SEC's complaint, filed in federal court in New York, the SEC seeks a permanent injunction, disgorgement plus pre-judgment interest, and a civil penalty.
Michael Ackerman is charged for raising at least $33 million from more than 150 investors through a fraudulent offer and sale of securities in the form of investment contracts between no later than July 1, 2017 and until at least December 1, 2019. He did this through two entities he controlled, Q3 Trading Club and Q3 I, LP.
The investors were made to believe that Ackerman had developed a proprietary algorithm that allowed him to generate extraordinary profits while trading in cryptocurrencies. Particularly, physicians made investments in the two Q3 companies based on these alleged claims by one of the business partners who also is a physician.
The SEC's complaint alleges that Ackerman 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 account.
He doctored computer screenshots taken of Q3's trading account to prepare false financial records to create the illusion that Q3 was highly invested in cryptocurrencies, with holding assets of as much as $310 million.
SEC alleges that in reality at no time did Q3's trading account hold more than $6 million and Q3 Companies' trading account had a monthly balance averaging only about $1.7 million. The profits generated by the Algorithm were also minimal. The false reports claimed that the Q3 Companies generated monthly profits of at least 15 percent.
He used $7.5 million of investor funds for personal purposes, buying and renovating a house, purchasing high end jewelry, multiple cars, and pay for personal security services.
In parallel actions, the U.S. Attorney's Office for the Southern District of New York and the Commodity Futures Trading Commission filed charges against Ackerman arising from similar conduct.
The SEC is conducting the investigations with assistance of the Commodity Futures Trading Commission, the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Department of Homeland Security.
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