SEC Charges Ohio Man for $33M Crypto Fraud Targeting Physicians

An Ohio man has been charged by the United States Securities and Exchange Commission for allegedly defrauding 150 investors in a cryptocurrency trading scheme.

The SEC’s complaint, filed in federal court in New York on Feb. 11, accuses Michael W. Ackerman of raising at least $33 million in violation of anti-fraud provisions for federal securities laws.

Luring investors via a private Facebook group for “Physician Dads”

Ackerman’s scam was operated together with two unnamed founding partners, with whom he established the Q3 Trading Club in June 2017. This was followed by an investment partnership Q3 I LP, and an affiliated entity, Q3 Holdings, LCC, both in the summer of 2018.

As of July 2017, Ackerman and his accomplices, one of whom is a surgeon, allegedly sought investors for the Q3 Trading Club via Facebook, targeting physicians in particular via a private “Physicians Dads Group” on the social media platform. 

The fraudsters purportedly claimed that an algorithmic trading strategy designed and deployed by Ackerman could deliver extraordinary profits. 

The SEC alleges the partners doctored screenshots of the Q3 trading account to create the false impression that it held as much as $310 million in assets, whereas in truth it contained no more than $6 million at any given time.

The agency accuses Ackerman of misleading investors about the success of his cryptocurrency trading, his use of investor funds, and the safety of investor funds in the Q3 trading account. As for the latter, investors were promised 50% of the account’s profits. 

Ackerman and partners allegedly converted only a fraction of investors' capital contributions to cryptocurrency, which was then stored in an offshore digital currency trading platform incorporated in the British Virgin Islands. 

The three partners are said to have pocketed lucrative licensing fees without disclosing this to investors.

As of March 2018, Ackerman is further accused of misleading his founding partners as to the monthly trading profits generated by the scheme. 

He is alleged to have personally enriched himself between March 2018 and December 2019, using $7.5 million in investor funds to purchase and renovate a house, buy expensive jewelry, multiple cars, and payroll personal security services.

For these alleged crimes, the SEC seeks a permanent injunction against Ackerman, disgorgement plus pre-judgment interest, and a civil penalty.

The U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission have also reportedly filed charges against him for his alleged conduct.

The SEC, crypto criminals, and dev assistance

Last month, the SEC charged a group of criminals alleged to have raised over $30 million through a fraudulent initial coin offering.

On Jan. 14, the SEC issued a fresh warning from its Investor Education and Advocacy wing, urging citizens to be wary of initial coin offerings.

In parallel to cracking down on heists, Commissioner Hester Peirce (a.k.a. “crypto mom”) has been developing a new proposal that would seek to establish a safe harbor for new blockchain networks and tokens that wish to avoid classification as securities.