The US District Court for the Southern District of Florida has imposed fines exceeding $130 million on the founders of EmpiresX, an investment platform that allegedly promised sky-high returns but delivered deceit and financial loss.
The court’s ruling followed a lawsuit filed by the Commodity Futures Trading Commission (CFTC) on June 30, 2022. After the defendants failed to respond, a default judgment was issued, leading to the hefty penalties.
Emerson Pires and Flavio Goncalves, the Brazilian masterminds behind EmpiresX, were found by the District Court to have orchestrated a scheme that misled investors through promises of lucrative crypto investments.
The duo, along with associate Joshua Nicholas, were accused of misusing investor funds for personal gains, including luxury purchases and travel, while showing fictitious profits on nonexistent investments.
The EmpiresX founders have fled to Brazil
The founders were collectively ordered to pay $32.1 million in disgorgement for their ill-gotten gains and an additional $96.5 million in civil monetary penalties.
Joshua Nicholas, who has already pleaded guilty to conspiracy to commit securities fraud, faces his own penalties of $289,000 in disgorgement and $867,000 in civil fines.
Investigators traced approximately $40 million that was funneled into the EmpiresX scheme, with part of it converted into cryptocurrencies like Bitcoin (BTC), Ether (ETH), and Tether’s USDT.
The authorities managed to recover around $22.8 million in digital currencies from the founders, providing some relief to the defrauded investors.
Beyond the financial penalties, the court issued permanent injunctions against Pires, Goncalves, and Nicholas, effectively banning them from participating in US financial markets.
After learning of the charges, Pires and Goncalves reportedly fled to Brazil, where they remain out of reach due to Brazilian laws prohibiting the extradition of its nationals.
US CFTC’s shift in crypto regulation under President Donald Trump
The EmpiresX debacle arrives at a pivotal time for cryptocurrency regulation in the US.
Acting CFTC Chair Caroline Pham announced on February 5 a shift away from what was termed “regulation by enforcement,” a practice more prevalent during the previous administration.
Instead, there will be a focus on realigning task forces to enhance market oversight and public confidence.
Brian Young, the CFTC’s Director of Enforcement, has emphasized the importance of these changes, stating that they are designed to uphold public confidence in the integrity of financial markets.
The EmpiresX case could serve as a cautionary tale for others in the burgeoning crypto space, signalling that regulatory bodies are sharpening their focus on fraud within cryptocurrency investments.
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