A Facebook group called the Physician Dads' Group was one of the avenues used to recruit investors into an alleged multimillion-dollar hedge fund scheme, according to details of an investigation by the Southern Investigative Reporting Foundation.
According to the Foundation for Financial Journalism, which detailed the investigation in a February 14 article, "Since December one theme has emerged from all the interviews conducted for this investigation: The shared educational and professional experiences among a diverse group of physicians engendered a level of trust among them so deep that it took only a few Facebook posts and screen captures to lead them, Pied Piper like, into financial disaster."
How It Started
The hedge fund trading involved cryptocurrency — Bitcoin and Ether are popular examples of the alternative to traditional currency. According to the investigation, there were three original partners who launched the fund, called Q3 I LP, in 2017: Quan D. Tran, MD, 44, a surgeon in Lutz, Florida; businessman Michael Ackerman of New York, and financial advisor James Seijas. Report authors said it is unclear how the three first met.
According to the investigation, the hedge fund "claimed monthly returns of 13 percent to 15 percent — and annual returns of 180 percent or more for its first two years of operation."
Tran served in a promotional role for the fund, according to the investigators, investing personally and recommending the fund through several informal doctors' networks that fed into the Facebook Physician Dads' Group.
"From November 2018 to December 2019, Q3 I LP raised more than $33 million from 150 limited partners," the report states.
According to the report of the investigation, "Based on the emails and documents the prospective investor provided, the fund bears all the signs of an affinity fraud — not the type plotted in a high-pressure boiler room but something brought to life through a few Facebook groups, email lists and group texts."
Two Emails Sent at End of 2019
Two emails sent in December let investors know there was trouble with the fund.
The first was sent by Ackerman to some limited partners, according to an affidavit by Homeland Security Investigations Special Agent John Rodriguez unsealed on February 11.
According to the report, "Ackerman said that because of a health problem that had led him to pursue treatment in New York City, he was suspending the fund's trading for the rest of December and all of January."
Minutes after Ackerman sent that email, Tran painted a different view of the status of the fund in an email to limited partners, the affidavit states.
Tran said in his email that he and Seijas visited Ackerman in his Sheffield Lake, Ohio home and gained access to his computer.
"[We] discovered what appeared to be a very large discrepancy between the assets [Ackerman] had been reporting to us and the balance in the trading account," the report said.
When they confronted Ackerman, he said he had moved the assets to a more secure account but refused to state where it was or give Tran or Seijas access, according to the Rodriguez affidavit. Soon after, they alerted the US Security and Exchange Commission's (SEC) Miami regional office, Tran's email said.
Indictment Unsealed, Complaints Filed
On February 11, the Southern District of New York unsealed an indictment in which the grand jury charged Ackerman with money laundering and "wilfully and knowingly" committing wire fraud.
At the same time, the SEC and the Commodity and Futures Trading Commission (CFTC) filed complaints against Ackerman.
The report authors note that in the SEC complaint, Tran and Seijas are referred to only as Founding Partner 1 and Founding Partner 2. The CFTC complaint also named Q3 I LP and its holding company Q3 Holdings LLC as defendants but did not cite Tran or Seijas.
Ackerman, Tran, and Seijas each owned one third of Q3 Holdings LLC, according to the report.
The report describes a tale of "how one person with an incredible story used two other people who were willing to shout it from the digital rooftops to allegedly steal about $34 million from some very well-educated people."
Based on the SEC and CFTC complaints, the report authors write that Ackerman told Tran and Seijas that a safeguard was built into the Q3 I LP's trading accounts so that he couldn't withdraw money without a second partner's approval, but according to both complaints, "Ackerman withdrew money at will."
Since Ackerman had total control of the software, he could alter the actual amounts to show inflated values of the fund. According to the SEC, "On Sept. 1, 2019, Ackerman sent Dr. Tran a text message that showed Q3 I LP's account balance as slightly less than $182 million, although in truth only $1.5 million was available."
About $23 Million Missing
The report says that, according to the SEC, only $10 million of Q3 I LP's $33 million received from limited partners was invested in various cryptocurrency exchanges.
The indictment and complaints allege that Ackerman paid himself about $7.5 million in fake performance fees.
The indictment also notes that prosecutors are pushing for Ackerman to forfeit five properties he bought in 2018 and 2019.
According to the SEC, Ackerman also bought three cars, spent $600,000 on personal security services, and spent $100,000 at Tiffany's.
Finding the rest of the $33 million will be difficult, the report authors note, as it has been in other cases in which investment funds have dissolved from fraudulent practices.
Paul Flannery, an attorney with Flannery, Georgalis LLC, who represented Ackerman in his February 14 arraignment in Cleveland, Ohio, did not respond to Medscape Medical News' request for comment before publication.
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Cite this: Physician Facebook Group Used in Alleged Multimillion Dollar Fraud - Medscape - Feb 25, 2020.
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