The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action in the U.S. District Court for the Southern District of New York against defendants Q3 Holdings, LLC and Q3 I, LP and their principal, Michael Ackerman. As was previously reported, the Securities and Exchange Commission (SEC) has also filed an enforcement action targeting Ackerman and his affiliated companies.
As with the SEC complaint, CFTC charges the defendants with fraudulently soliciting over $33 million to purportedly trade digital assets and misappropriating a substantial portion of that total.
“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,” said CFTC Director of Enforcement James McDonald. “Rooting out misconduct is essential to furthering the responsible development of these innovative financial products.”
The complaint specifically alleges that from at least August 2017 through December 2019 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:
(i) earning customers .5% in daily trading profits and roughly 15% per month,
(ii) using algorithms that generated winning trades 75% of the time, and
(iii) utilizing security measures that made it impossible for any principal to transfer or withdraw customer funds.
In reality, the defendants allegedly 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.