CFTC fines EmpiresX founders $130M in crypto fraud case

A US federal court ordered more than $130 million in penalties and restitution against the Brazilian founders of EmpiresX, an illegal cryptocurrency investment platform, the Commodity Futures Trading Commission (CFTC) announced.

On Feb. 4, Judge Cecilia Altonaga of the US District Court for the Southern District of Florida imposed permanent injunctions, financial penalties and other legal actions against EmpiresX founders Emerson Pires and Flavio Goncalves, along with associate Joshua Nicholas. 

The case, originally filed on June 30, 2022, resulted in a default judgment after the defendants failed to respond to the accusations by the deadline.

Promise of unrealistic return on investments

According to the court documents, Empires Consulting operated a fraudulent investment scheme, EmpiresX, which falsely promised high returns to investors. Pires and Goncalves were charged with obtaining at least $40 million from victims through false crypto advertisements. 

Instead of investing the funds as promised, the founders misused them to purchase Bitcoin (BTC), Ether (ETH) and USDt (USDT), while restricting withdrawals and displaying fake profits from non-existent investments.

The EmpireX founders used the funds for personal expenses, including luxury purchases and travel. Still, investigators recovered about $22.8 million in digital currencies from them.

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The court found the EmpiresX executives guilty of multiple violations, including fraudulent misrepresentation and deception, failure to register with the CFTC, misappropriation of funds and violation of trading and regulations.

While Nicholas was arrested and pleaded guilty to conspiracy to commit securities fraud on Sept. 8, 2022, the founding duo reportedly fled to Brazil after learning about the CFTC charges.

In July 2022, the US Department of Justice filed a notice to transfer the EmpiresX founders to fugitive status. However, Brazilian law prohibits the extradition of its citizens, making their arrest and extradition to the US unlikely.

CFTC secures hefty fines and perma ban on trading

The founders were jointly fined $32.1 million for disgorgement and $96.5 million as a civil monetary penalty. Nicholas was fined $289,000 and $867,000, respectively, for the same offenses.

In addition to the financial penalties exceeding $130 million, the CFTC secured a court order banning the defendants from trading in US financial markets.

On Feb. 5, CFTC acting chair Caroline Pham announced that the agency would be winding down its practice of regulation by enforcement during the Trump administration.

Still, enforcement director Brian Young revealed a forthcoming task force realignment will help “uphold public confidence in the integrity of our markets.”

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