The US-based Commodity Futures Trading Commission, or CFTC, has filed a complaint against one Micheal Ackerman and Q3 Holdings LLC and Q3 I LP, the company he had founded. The charge is in regards to the regulator accusing all three entities of fraud.
Only $10 Million of $33 Million Used For Trading
According to the complaint submitted by the CFTC at the New York Southern District Court, Ackerman and Q3 operated a fraudulent scheme between August of 2017 and December of 2019. Through this scheme, all accused parties allegedly misappropriated and solicited funds that they had claimed would be used to trade digital currencies. Thanks to fraudulent misrepresentations brought forth by both Q3 and Ackerman, over 150 investors, both individuals, and entities, paid Q3 at least $33 million. Of that amount, reportedly only $10 million was used wired to accounts of digital currency exchanges.
Bad Trading Along With Bad Practices
According to the allegations laid down by the CFTC, the defendants transferred $25 million of the solicited funds from Q3’s customers’ fund accounts to personal accounts. These accounts include Ackerman’s, as well as two other individuals that Ackerman had founded Q3 with. Ackerman himself had received $7 million of the stolen Q3 customer funding for himself.
As is the norm of these kinds of schemes, the Defendants gave intentional false representations that they were turning a profit. In this particular case, the claim of monthly returns was a relatively modest 15%, as these kinds of scams typically go for about 30%. The Defendants actually did try to trade in digital currencies with the meager funding they funneled that way, but even that was lost in bad trading. All in all, most of the customers’ money was lost by way of lousy trading and misappropriations.
Smoke And Mirrors
In order to try and hide their fraudulent activities, the defendants had provided customers of Q3 with things like false trading returns portrayed on newsletters, doctored screenshots reflecting the amount of money that Q3 was managing, as well as the classic false accounting statements.
The CFTC has claimed that these defendants are engaging, were about to engage, or have participated in the past in fraudulent practices and acts. In particular, acts violating the Commodity Exchange Act as well as the Commission’s regulations.
It seems nothing new has happened in the financial industry. Please be aware that there is such a thing as too good to be true when you invest in a company.