US Court Orders Over $130 Million in Penalties Against EmpiresX Founders for Crypto Fraud
A U.S. federal court has ordered more than $130 million in penalties and restitution against the Brazilian founders of EmpiresX, an illegal cryptocurrency investment platform, according to a statement from the Commodity Futures Trading Commission (CFTC).
The ruling marks another significant crackdown on crypto-related fraud.
Court Ruling Against EmpiresX Executives
On February 4, Judge Cecilia Altonaga of the U.S. District Court for the Southern District of Florida issued permanent injunctions and substantial financial penalties against EmpiresX founders Emerson Pires and Flavio Goncalves, as well as their associate Joshua Nicholas. The case, originally filed on June 30, 2022, ended in a default judgment after the defendants failed to respond to the accusations within the required timeframe.
The ruling includes severe consequences for the trio, barring them from participating in trading activities in U.S. financial markets and imposing hefty fines.
Fraudulent Investment Scheme
According to court documents, EmpiresX falsely marketed itself as a high-return investment platform, luring investors with misleading claims of substantial cryptocurrency profits. Pires and Goncalves were found to have solicited at least $40 million from unsuspecting victims through fraudulent advertisements.
Also read: Billionaire Investors Go Crypto: TIGER 21 Commits $6 Billion to Digital Assets
Instead of using the funds for legitimate investments, the founders misappropriated the money to purchase Bitcoin (BTC), Ether (ETH), and Tether (USDT), while restricting withdrawals and generating fake profit reports to deceive investors. The fraudulent scheme allowed the duo to finance personal expenses, including luxury purchases and travel. However, investigators managed to recover approximately $22.8 million in digital currencies from them.
Legal Consequences and Extradition Challenges
The court found the EmpiresX executives guilty of multiple violations, including fraudulent misrepresentation, failure to register with the CFTC, misappropriation of funds, and violations of trading regulations.
Joshua Nicholas was arrested and pleaded guilty to conspiracy to commit securities fraud on September 8, 2022. However, Pires and Goncalves evaded arrest by fleeing to Brazil after the CFTC’s charges were announced. The U.S. Department of Justice (DOJ) moved to classify them as fugitives in July 2022, but their extradition remains unlikely due to Brazilian laws prohibiting the extradition of its own citizens.
Also read: Solana Meme Coin Platform Pump.fun Faces Cease and Desist
Massive Penalties and Trading Ban
As part of the ruling, the founders were collectively ordered to pay $32.1 million in disgorgement and an additional $96.5 million as a civil monetary penalty. Nicholas was fined $289,000 in disgorgement and an additional $867,000 in penalties.
Beyond financial restitution, the court imposed a permanent trading ban on all defendants, effectively barring them from engaging in financial markets within the U.S.
CFTC’s Future Enforcement Plans
The ruling comes amid shifts in regulatory strategies within the CFTC. On February 5, CFTC acting chair Caroline Pham announced that the agency would be moving away from the regulation-by-enforcement approach that gained prominence during the Trump administration. However, CFTC enforcement director Brian Young emphasized the need for a realignment within the agency to maintain public confidence in market integrity.
The EmpiresX case serves as another stark reminder of the risks associated with unregulated cryptocurrency platforms, reinforcing the growing efforts by U.S. regulators to clamp down on fraudulent schemes in the digital asset space.
