Home > News > Asset Allocation > Cryptocurrency Scam Allegedly Swindles Doctors Out of $33 Million
Asset Allocation

Cryptocurrency Scam Allegedly Swindles Doctors Out of $33 Million

Michael Ackerman boasted his algorithm generated monthly profits of 15%.
By Michael Katz

The SEC has filed charges against an Ohio-based businessman for allegedly heading a digital asset scam that defrauded 150 investors—most of whom were physicians—out of at least $33 million, and using the funds to pay for a house, cars, jewelry, and personal security services.

According to the SEC’s complaint, Michael Ackerman, 50, along with two business partners, claimed to have developed a proprietary algorithm that allowed him to generate monthly profits of 15% trading in cryptocurrencies through his companies Q3 Trading Club and Q3 I LP.

“Ackerman lured investors, many in the medical profession, into falsely believing that he generated extraordinary profits from his algorithmic trading strategy,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Ackerman exploited popular interest in digital assets as a means to obtain millions of dollars for his personal use.”

Ackerman allegedly misled investors about the performance of his digital currency trading, his use of investor funds, and the safety of investor funds. The SEC also alleges that Ackerman doctored computer screenshots taken of Q3’s trading account to create the illusion that it was highly invested in cryptocurrencies and was extraordinarily profitable, with assets of as much as $310 million.

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However, “contrary to information Ackerman provided, from November 2017 until December 2019, the Q3 Companies’ trading account had a monthly balance averaging about $1.7 million,” the SEC said in its complaint. “During that time, the monthly account balance was never higher than about $5.815 million.”

To conceal the truth from investors, Ackerman allegedly prepared false financial records by doctoring screenshots showing the firm’s trading account balances. He also prepared monthly newsletters to investors or otherwise caused investors to receive false account information that said the Q3 Companies generated monthly profits of at least 15%.

The SEC said Ackerman enriched himself by using $7.5 million of investor funds to purchase and renovate a house, buy high-end jewelry and multiple cars, and pay for personal security services.

The scheme took in many physicians because one of Ackerman’s business partners was a surgeon and a member of a Facebook group called “Physicians Dads Group,” where he posted about the Q3 Trading Club and from which he attracted investors.

The SEC said many swindlers take advantage of the trust that having something in common creates, such as a common profession. The regulator has issued an investor alert with tips on how investors should avoid investment decisions based solely on common ties with someone recommending or selling an investment.

The SEC’s complaint, filed in federal court in New York, charges Ackerman with violations of the antifraud provisions of federal securities laws. The regulator is seeking a permanent injunction, disgorgement plus pre-judgment interest, and a civil penalty. In parallel actions, the US Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission filed charges against Ackerman arising from similar conduct.

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Home > News > Asset Allocation > Will the Election Make the Stock Market Volatile?
Asset Allocation

Will the Election Make the Stock Market Volatile?

One-third of investors in poll expect choppy prices as 2020 rolls on.
By Larry Light

One thing about 2020 is a given: The presidential contest will be a rollicking affair. So there’s a strong investor expectation that the political fray will bring stock market volatility.

Some 33% of investors expect “very substantial” volatility this year, owing to the campaign, according to a survey by Global Atlantic Financial Group. Also, Mitch Zacks, senior portfolio manager at Zacks Investment Management, looks for politically inspired “bumpiness” in the market this year, which he thinks will nevertheless end up with positive returns.

In his firm’s latest report, Zacks warned of possible election-linked civil unrest, contested results, and foreign interference, which could rock the market. (Other factors, such as reduced buybacks, also could prompt volatility, he added.)

Given President Donald Trump’s pugnacious personality and the angry political split among the public, a spilling over into more volatility seems reasonable.

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The average historical score of the CBOE Volatility Index, or VIX, is roughly 15. Scores below 10 are considered low, and above 20, high.

Right now, volatility is quiet. On Friday, the index, also known as “the fear gauge,” finished at 13.7. Its highest point of the year thus far was 18.8 on Jan. 31, perhaps having more to do with the onset of the coronavirus than US politics.

Going back to 1990, which is when the VIX initially appeared, volatility in presidential election years has been in the tame mid-teens. The only two outlier years had more to do with economic events. The first was in 2000 (average: 23.2), marked by the dot-com stock rout that began in March, and 2008 (32.7), when the gathering unease throughout the year over sub-prime mortgages culminated that fall with the financial crisis.

On the whole, stocks have performed well in presidential years. According to data from the Dimensional Fund Advisors Matrix Book, the S&P 500 was negative in just four of the past 25 presidential election years. (The S&P’s predecessor index began in 1926, so the first election year in the list was 1928, when Herbert Hoover faced Al Smith.)

Volatility, of course, doesn’t always equate with a market downturn. The lack of it in recent years can be blamed in part for lackluster hedge fund performance. Hedge strategies often rest on taking advantage of price discrepancies when share prices are in turmoil.

And if the good equities track record in the quadrennial election years holds true, few investors will be complaining about volatility. “Election years have historically been good for stocks, and I think 2020 will be, too,” Zacks wrote in his report.

 

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