CFTC pushes for $27M fine to be imposed on Q3 Holdings, Michael Ackerman
The Commodity Futures Trading Commission (CFTC) has filed a proposed default judgment against fraudulent digital asset scheme Q3 Holdings and its principal Michael Ackerman.
On September 28, 2022, the Commission moved the New York Southern District Court to grant final judgment by default against the defendants, order permanent injunctive relief, and impose a restitution obligation and a civil monetary penalty.
Pursuant to Section 6c(d)(1) of the Act, 7 U.S.C. § 13a-1(d)(1) (2018), the defendants shall pay a civil monetary penalty in the amount of $27,092,907.70.
Let’s recall that, in February 2020, the CFTC announced the filing of a civil enforcement action against defendants Q3 Holdings, LLC and Q3 I, LP and their principal, Michael Ackerman. The complaint charged the defendants with fraudulently soliciting over $33 million to purportedly trade digital assets and misappropriating a substantial portion of that total.
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 sent only a small portion of the customers’ funds to digital asset trading accounts, did not earn the trading profits they claimed, and 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.