Crypto Founders Fined $130M for $40M Scam

The U.S. federal court has imposed a significant penalty of over $130 million on the founders of EmpiresX, a fraudulent cryptocurrency investment platform. The decision, announced by the Commodity Futures Trading Commission (CFTC), has permanently barred the Brazilian duo, Emerson Pires and Flavio Goncalves, from participating in U.S. financial markets. They, along with associate Joshua Nicholas, now face serious legal and financial consequences.

The case, which dates back to June 2022, involved charges that EmpiresX operated a deceptive investment scheme that lured investors with promises of high returns. Pires and Goncalves were accused of defrauding investors out of at least $40 million through misleading crypto ads. Instead of investing the funds as promised, the founders misused the capital to buy digital assets like Bitcoin, Ether, and USDT (Tether). They restricted investor withdrawals and presented fake profits to create the illusion of a successful venture.

Court records revealed that the founders siphoned funds for personal luxuries, including high-end purchases and travel, while victims were left in the dark. Despite their misconduct, investigators managed to recover about $22.8 million in digital currencies from the defendants, but the majority of the stolen funds remain unaccounted for.

The court’s judgment came in the form of a default ruling, as the accused failed to respond to the CFTC’s charges. While Nicholas, a key associate, was arrested and pled guilty to conspiracy to commit securities fraud in 2022, Pires and Goncalves absconded to Brazil, where extradition is prohibited by law. As a result, they remain at large, further complicating the recovery of stolen assets.

Beyond the hefty financial penalties of $32.1 million in disgorgement and $96.5 million in civil fines for the founders, and fines for Nicholas totaling $289,000 and $867,000, the court also issued permanent bans preventing them from trading in U.S. markets. Despite the founders’ escape, the CFTC’s commitment to enforcing market integrity remains steadfast, as it shifts focus from past regulatory practices to a more strategic, task-oriented approach.