Brazilian Founders Penalised for Defrauding Investors
A US federal court has imposed fines exceeding $130 million on the Brazilian founders of EmpiresX, an illegal cryptocurrency investment platform, for orchestrating a fraudulent scheme that misled investors. The Commodity Futures Trading Commission (CFTC) announced the penalties, which include financial restitution and a permanent trading ban.
On 4 February, Judge Cecilia Altonaga of the US District Court for the Southern District of Florida ruled against EmpiresX founders Emerson Pires and Flavio Goncalves, along with their associate Joshua Nicholas. The case, initially filed on 30 June 2022, resulted in a default judgment after the defendants failed to respond to the charges.
False Promises and Misuse of Investor Funds
According to court documents, Empires Consulting operated EmpiresX under fraudulent pretences, falsely advertising high returns to investors. Pires and Goncalves were found guilty of acquiring at least $40 million from victims through misleading cryptocurrency promotions.
Instead of investing the funds as promised, the duo misused them for personal expenses, including luxury purchases and travel. They also restricted withdrawals and presented fake profits from non-existent investments. Authorities later recovered approximately $22.8 million in digital assets from their operations.
The court deemed the EmpiresX founders guilty of multiple violations, including fraudulent misrepresentation, deception, failure to register with the CFTC, and misappropriation of funds.
Founders Fled to Brazil Amid Legal Proceedings
While Joshua Nicholas was arrested and pleaded guilty to conspiracy to commit securities fraud on 8 September 2022, Pires and Goncalves reportedly fled to Brazil upon learning of the CFTC charges.
In July 2022, the US Department of Justice sought to classify the pair as fugitives. However, Brazilian law prohibits the extradition of its citizens, making their return to the US unlikely.
Heavy Fines and Permanent Trading Ban
The court ordered Pires and Goncalves to pay $32.1 million in disgorgement and an additional $96.5 million as a civil monetary penalty. Nicholas was fined $289,000 and $867,000 for the same violations.
Beyond the financial penalties, the CFTC secured a court order permanently banning all three individuals from trading in US financial markets.
On 5 February, CFTC acting chair Caroline Pham announced that the agency would move away from its previous regulatory enforcement approach. Meanwhile, enforcement director Brian Young stated that a forthcoming task force realignment would help maintain public confidence in the integrity of financial markets.
