(HedgeCo.Net) The Securities and Exchange Commission has announced fraud charges against Empires Consulting Corp. (EmpiresX), its founders Emerson Sousa Pires and Flavio Mendes Goncalves, and its head trader Joshua David Nicholas, for a scheme that allegedly raised at least $40 million by luring investors with false claims of one percent daily profits, but instead misappropriated large sums of investors’ money for personal uses.
According to the SEC’s complaint, since at least late 2020, EmpiresX, based in South Florida, sold investments touting daily profits of one percent earned by a trading “bot” or Nicholas’ manual trading. The complaint alleges that, in reality, the bot was fake, Nicholas’ trading resulted in significant losses, and the defendants only transferred a small portion of investors’ funds to EmpiresX’s brokerage account. Instead, the defendants allegedly misappropriated large sums of investors’ money to lease a Lamborghini, shop at Tiffany & Co., make a payment on a second home, and more.
To assure investors of the safety of their investments, the defendants allegedly falsely told investors that EmpiresX had filed paperwork with the SEC to register as a hedge fund. Defendants also allegedly touted Nicholas as a licensed trader while concealing he was suspended by the National Futures Association from trading for misappropriating customer funds. The complaint further alleges that, when their scheme began to collapse, the defendants broke earlier promises that investors could easily withdraw their money and assurances of repayment. By early 2022, Pires and Goncalves allegedly began winding down EmpiresX’s operations and had left the United States.
“The defendants allegedly engaged in an unregistered offering with a slew of fraudulent statements designed to lure investors with the prospect of steady daily profits,” said Carolyn Welshhans, Acting Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit. “The SEC’s investigation has uncovered the steps the defendants took to conceal their alleged fraud, and today’s action serves to protect investors by bringing that misconduct to light.”
The SEC’s complaint charges the defendants with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint seeks injunctions against future securities law violations, disgorgement of the defendants’ ill-gotten gains, civil penalties, and officer and director bars against Pires and Goncalves.
In parallel actions, the U.S. Department of Justice and Commodity Futures Trading Commission (CFTC) today announced charges against Pires, Goncalves, and Nicholas, and the CFTC also charged Empires Consulting Corp.