Purported Crypto Trader Should Pay more than $100M, CFTC Says

The U.S. Commodity Futures Trading Commission asked a Manhattan federal judge to enter a final judgment against a purported cryptocurrency trader Michael Ackerman and his two companies Q3 Holdings LLC and Q3 I LP in connection with wire fraud and misappropriation of customers funds. Together, restitution and the fine would total more than $108 million.

In its motion, CFTC said that:

Such a penalty is within the court’s statutory authority, will protect the commission’s regulatory interests and integrity of the markets, and will send a clear message to deter others from engaging in a similar fraudulent scheme.

The CFTC, the U.S. Securities and Exchange Commission, and federal prosecutors in Manhattan all took legal action against Ackerman and two of its companies in early 2020. The regulator alleged that Ackerman and some unnamed associates started soliciting investors in July 2017. Their pitch included the claim that Ackerman had a proprietary trading algorithm and was able to generate monthly returns as high as 15%. To convince customers that this was true, they sent out bogus account statements.

As per the records, CFTC alleges that from at least August 2017 through December 2019, Ackerman and Q3 operated a fraudulent scheme in which they solicited and misappropriated funds to purportedly trade virtual currencies. Due to Ackerman’s and Q3’s fraudulent misrepresentations, more than 150 individuals and entities deposited at least $33 million with Q3 but less than $10 million of the $33 million in Q3 customer funds was wired to virtual currency exchanges.

The CFTC found that 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. In an attempt to conceal their fraud, Q3 founders provided customers with false accounting statements, newsletters containing false trading returns, and fictitious screenshots reflecting the amount of money under Q3’s management.