The SEC has filed charges against an Ohio-based businessman for allegedly heading a digital asset scam that defrauded 150 investors—most of whom were physicians—out of at least $33 million, and using the funds to pay for a house, cars, jewelry, and personal security services.
According to the SEC’s complaint, Michael Ackerman, 50, along with two business partners, claimed to have developed a proprietary algorithm that allowed him to generate monthly profits of 15% trading in cryptocurrencies through his companies Q3 Trading Club and Q3 I LP.
“Ackerman lured investors, many in the medical profession, into falsely believing that he generated extraordinary profits from his algorithmic trading strategy,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Ackerman exploited popular interest in digital assets as a means to obtain millions of dollars for his personal use.”
Ackerman allegedly misled investors about the performance of his digital currency trading, his use of investor funds, and the safety of investor funds. The SEC also alleges that Ackerman doctored computer screenshots taken of Q3’s trading account to create the illusion that it was highly invested in cryptocurrencies and was extraordinarily profitable, with assets of as much as $310 million.
However, “contrary to information Ackerman provided, from November 2017 until December 2019, the Q3 Companies’ trading account had a monthly balance averaging about $1.7 million,” the SEC said in its complaint. “During that time, the monthly account balance was never higher than about $5.815 million.”
To conceal the truth from investors, Ackerman allegedly prepared false financial records by doctoring screenshots showing the firm’s trading account balances. He also prepared monthly newsletters to investors or otherwise caused investors to receive false account information that said the Q3 Companies generated monthly profits of at least 15%.
The SEC said Ackerman enriched himself by using $7.5 million of investor funds to purchase and renovate a house, buy high-end jewelry and multiple cars, and pay for personal security services.
The scheme took in many physicians because one of Ackerman’s business partners was a surgeon and a member of a Facebook group called “Physicians Dads Group,” where he posted about the Q3 Trading Club and from which he attracted investors.
The SEC said many swindlers take advantage of the trust that having something in common creates, such as a common profession. The regulator has issued an investor alert with tips on how investors should avoid investment decisions based solely on common ties with someone recommending or selling an investment.
The SEC’s complaint, filed in federal court in New York, charges Ackerman with violations of the antifraud provisions of federal securities laws. The regulator is seeking a permanent injunction, disgorgement plus pre-judgment interest, and a civil penalty. In parallel actions, the US Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission filed charges against Ackerman arising from similar conduct.