The SEC is suing EmpiresX and its executives for $40 million in securities fraud.
The federal securities laws’ registration requirements were broken by the defendants’ offers and sales of EmpiresX securities, which were also fraudulent.
To hold the Defendants accountable for their deception, the SEC filed this complaint.
The SEC filed its case on June 30th. The defendants are EmpiresX, founders Emerson Pires and Flavio Goncalves, and chief trader Joshua David.
In June 2021, BehindMLM examined EmpiresX and determined that it was a Ponzi scam paying out 1% daily.
The lawsuit from the SEC confirms our conclusions;
Accusations of “exponential” earnings, daily investment returns of 1%, and the promise of millions of dollars “in a matter of months” were used by the defendants to entice investors.
Defendants claimed to investors that either a proprietary trading “bot” or manual trading by Defendant Nicholas would be used by EmpiresX to produce these astronomical profits.
But these assertions were false.
In actuality, the bot was a phony, the defendants only traded a small portion of the money they received from investors, and their little trading failed to produce anything close to the projected profits they boasted to investors.
A fictitious business called Empires Consulting Corp was established in Florida in 2020.
Co-founders of EmpiresX are Flavio Mendes Goncalves and Emerson Sousa Pires. They are both citizens of Brazil.
Before learning that the SEC was looking into EmpiresX, Pires and Goncalves were living in Florida. Then they took off for Brazil.
Florida native and US citizen Joshua David Nicholas reside there. He is listed as the chief trader of EmpiresX.
EmpiresX’s founders were its main victims, as with other MLM Ponzi schemes.
Large quantities of investor money were improperly used by the defendants for their expenses such as expensive automobiles, homes, and vacations.
Pires used investor money to pay for personal expenses like the following: $400,000 for travel, $250,000 for home improvements, $125,000 for a down payment on a different house, $70,000 for the down payment on a Lamborghini Urus lease, $47,000 for clothing, $33,000 for food and groceries, $19,000 for a mortgage, and $15,000 for home furnishings.
Additionally, Pires moved more than $250,000 to himself, his family, and acquaintances, as well as approximately $358,000 to another firm he runs.
At least $421,000 in investor cash went to Goncalves, and at least another $99,000 went to his family members.
Goncalves used the money obtained from the investors on himself, spending $69,000 at five-star hotels, $43,285 on a Ferrari 488 GTB lease, and $7,000 at Jaguar Land Rover, $3,000 at Tiffany & Co., and other expenses including food shopping and a gym subscription.
Nicholas earned at least $289,000 from investors between May 2021 and April 2022, which he also used for personal expenses.
The SEC’s Complaint has a lot to understand, so I’ve grouped the important elements under the appropriate areas here.
There was no trading bot for EmpiresX.
Having a trading bot is the “go-to ploy” for MLM cryptocurrency Ponzis.
To do this, EmpiresX claimed that “Export” was earning affiliates 1% daily on deposited money.
According to Pires, investors and EmpiresX would share profits, with investors keeping the majority (80%) of their returns while EmpiresX received 20%.
Defendants misrepresented that the Exbot was linked to EmpiresX’s online account at Brokerage Firm A and displayed the Exbot ostensibly actively trading in that account during several Zoom sessions with investors and potential investors.
Investors were given false information regarding the Exbot by the defendants.
The broker firm A’s EmpiresX account was not linked to the bot. In actuality, Brokerage Firm A has no record of EmpiresX.
Additionally, the Export did no actual trading, therefore the daily returns of 1% were made up.
The internet brokerage firm isn’t accurate. Investors were presented with a bogus account during live Zoom sessions.
Investors were unaware that the Brokerage Firm Investors were presented with a website that was registered to a business controlled by Goncalves and was created to mimic a genuine online account at Brokerage Firm A.
Trading was horrible for Joshua Nicholas.
The second trading hoax that EmpiresX promoted was Joshua Nicholas, who claimed to be a “master trader”.
Goncalves and Nicholas displayed to investors the performance of EmpiresX’s investments as seen in an online account at a different significant U.S. brokerage (“Brokerage Firm B”) owned by EmpiresX.
The account was described by Goncalves and Nicholas as a “hedge fund” whose gains came from Nicholas’s choice of investments and timing of trades.
Nicholas asserted that EmpiresX’s trading performance at Brokerage Firm B beat the market. Pires stated that EmpiresX continues to offer “great earnings” regardless of what the market does.
Similar to the Exbot, defendants made false claims regarding the success of their private assets.
The majority of the cash in the account came from a pool of investor monies totaling about $1 million, which EmpiresX placed into the account between April 16, 2021, and June 4, 2021, rather than earnings.
However much manual trading Nicholas did, it didn’t result in 1% daily earnings. In actuality, a large portion of Nicholas’ trading produced huge losses.
Early in 2022, Nicholas’ trading had almost destroyed the account’s funds.
Joshua Nicholas’ NFA suspension and trading prohibition were made public by BehindMLM in July 2021.
The SEC’s complaint also mentions this;
Despite failing to mention Nicholas’s disciplinary history, the defendants boasted to investors about his background, trading skills, and securities licenses.
In a July 30, 2021 Zoom discussion with investors, Nicholas only mentioned his NFA ban after internet blogs made Nicholas’ disciplinary history public.
Nevertheless, the defendants would continue to tout Nicholas’s trading prowess in further investor presentations without bringing up his suspension.
However, I’m getting mad!
Everyone involved in an MLM Ponzi scam who believes backoffice figures indicate they are being paid must face the following reality:
Using EmpiresX’s back office, the defendants falsely and deliberately misrepresented the account balances of both the Exbot and individual investors.
These online accounts allegedly displayed investors’ daily earnings and commissions, giving the impression that they were getting paid for both their investments and the acquisition of new investors.
These claims encouraged investors to reinvest their “earnings,” which postponed the deadline for EmpiresX to pay investors their revenues.
Based on the returns they thought their initial investments had earned, several investors also made new investments or attracted new investors.
In reality, the investor account balances were made up, and after November 2021, EmpiresX ceased to recognize investor withdrawal requests.
EmpiresX never submitted any documents to the SEC.
To take attention away from recently implemented withdrawal limits, EmpiresX said in October 2021 that it had submitted an “SEC licensing request.”
This was a scam, according to the SEC;
Defendants misled investors by claiming that EmpiresX had registered as a hedge fund with the SEC, and instead pointed them to the filings of an unrelated hedge fund with the same name as EmpiresX that had done so.
On a Zoom call on September 9, 2021, Nicholas presented investors with a “Prospectus” for a fictitious hedge fund run by Empires X that would issue about 80 million shares at $25 per share.
As soon as EmpiresX surpassed $100 million in assets under management, which Nicholas anticipated would happen in the next few days, he said, this Prospectus will be filed with the SEC.
In the same presentation, Nicholas also displayed to investors the contracts he promised would be submitted to the SEC.
Nicholas falsely claimed that after the SEC finished reviewing EmpiresX’s paperwork, the SEC would issue a document “verifying everything that we already have created” by displaying what appeared to be an official-looking SEC document but was a cease-and-desist order against an unrelated entity.
Pires and Nicholas misled investors during a Zoom meeting on October 11, 2021, by claiming that EmpiresX had submitted papers to the SEC, that the SEC had given input, and that EmpiresX had then submitted a new filing.
Goncalves also misled investors during a Zoom discussion on October 21, 2021, by saying EmpiresX submitted an amended file to the SEC.
Goncalves continued by saying he was “quite positive” that the SEC would approve of EmpiresX.
By pointing investors to the SEC filings of an unrelated company with a similar-sounding name that featured the phrase “EmpireX,” Nicholas further misled investors regarding the status of EmpiresX’s SEC registration.
Nicholas specifically said in the October 11, 2021 Zoom meeting that investors may verify the progress of EmpiresX’s SEC filing by visiting sec.gov, searching for “EmpiresX,” and seeing the documents EmpiresX had submitted.
The true filer with a similar name issued a press release denying the claims of the company “EmpiresX,” which had been using our name, address, and financial license from the United States illegally to deceive people all over the world with fraudulent investment operations, after learning that EmpiresX was improperly directing investors to its SEC filings.
The SEC never received any registration documents or filings from EmpiresX and never offered advice or recommendations.
Demise of EmpiresX
EmpiresX’s collapse was predicted by BehindMLM on December 1st, 2021, after a month and a half of withdrawal non-payment.
When Pires and Goncalves learned that US officials were looking into them, this was what sparked everything.
Pires and Goncalves started closing down EmpiresX’s US businesses after getting subpoenas as part of the SEC probe.
According to rumors and intelligence, they have moved to Brazil, where they both have nationalities.
This was the situation up until the SEC filed a lawsuit on June 30.
The defendants of EmpiresX are charged with seven counts of securities fraud in the SEC action.
The regulator also requests a civil fine, a lifetime injunction, and the return of any earnings that were obtained illegally.
In addition, the CFTC has brought its civil action against EmpiresX, Pires, Goncalves, and David.
Additionally, the trio has been charged criminally with connected offenses.
Both the legal case by the CFTC and the criminal charges against EmpiresX are now being covered by BehindMLM.
Update: The coverage of the CFTC’s civil case and the EmpiresX indictments by BehindMLM is online as of July 1st, 2022.