EmpiresX victim class-action filed in Florida (Receivership?)
Two EmpiresX victims have filed a civil class-action in Florida.
That’s on top of the CFTC’s and SEC’s civil regulatory lawsuits against EmpiresX.
What’s interesting is the Florida state court hearing the class-action has appointed an EmpiresX Receiver.
The CFTC and SEC EmpiresX case dockets came up today on BehindMLM’s calendar.
There wasn’t anything new on the CFTC case docket. A filing request more time to file a Joint Scheduling Report on the SEC docket caught my attention though, and that led me to this:
Defendant Empires Consulting Corp. is presently under a Florida state court receivership.
This was the first I’d read about a Florida state lawsuit, and certainly the first I’d heard of an EmpiresX Receivership.
I pulled up the case in Florida and found a class-action filed against EmpiresX on June 10th.
Class-action Plaintiffs Eric Villanueva and Francisco Gonzalez are both Florida residents.
Plaintiff Eric Villanueva joined EMPIRES-X in August 2021 through an EMPIRES-X recruiter.
His initial investment was in the amount of $ 9,500; he made additional contributions through April 2022 totaling $25,000.
He has not received any payments relating to his investment from EMPIRES-X DEFENDANTS.
Plaintiff Francisco Gonzalez joined EMPIRES-X in October 2021 through an EMPIRES-X recruiter. His initial investment was in the amount of $ 4,200 and made no additional contributions.
He has not received any payments relating to his investment from EMPIRES-X DEFENDANTS.
Who recruited Villanueva and Gonzales into EmpiresX is not disclosed.
Named defendants in the class-action are Empires X Corp, Empires Consulting Corp, EmpX Management LLC, Emerson S. Pires, Flavio M. Goncalves and Joshua David Nicholas.
This is a classic, but unfortunate, story about how a well-orchestrated cryptocurrency ponzi scheme targeted vulnerable victims here in South Florida.
These experienced criminals—who have recently fled and are on the run with Plaintiffs’ and Class Members’ money—were only able to steal tens of millions of dollars with the willing assistance of other “reputable” accomplices.
CoinBase is named as a related non-party. The crypto exchange is accused of assisting EmpiresX launder a “substantial portion” of invested funds.
Based on the high volume of activity taking place through EMPIRES-X’s and EMPIRES-X DEFENDANTS’ COINBASE accounts, COINBASE should have been alerted as to the suspicious activity and should have promptly investigated the accounts.
Notwithstanding the regulatory requirements COINBASE faced as a Money Services Business under the FinCEN division of the U.S. Treasury Department, COINBASE turned a blind eye to the obvious red flags.
COINBASE failed to verify that the cryptocurrency assets—including Bitcoin, Ether, and USD Tether—were actually derived from legitimate sources, which is something that could have easily been verified.
In fact, under the Bank Secrecy Act, COINBASE has a duty to inquire and/or report if suspicious activity is involved in transmitting money.
COINBASE knew or should have known that the assets being liquidated through its exchange did not rightfully belong to EMPIRES-X and/or EMPIRES-X DEFENDANTS.
COINBASE turned a blind eye to the crimes that it facilitated.
The EMPIRES-X scheme perpetrated by EMPIRES-X DEFENDANTS has harmed thousands if not millions of people nationwide and internationally, many of which have lost their life savings.
According to some recent reports, there are as many as 1.2 million accounts registered with EMPIRES-X.20 An estimated 60 million dollars, conservatively, has been taken in by EMPIRES-X DEFENDANTS.
Villanueva and Gonzales, through their attorneys, seek to represent EmpiresX victims.
While the exact number of class members remains unknown at this time, upon information and belief, there are at least thousands of putative Class members.
The exact number will be discovered through discovery. In fact, Undersigned Counsel currently represents over 85 EMPIRES-X users, who collectively lost millions of dollars into the EMPIRESX PLATFORM alone.
Accompanying the proposed class-action was a motion seeking a Temporary Restraining Order, asset freeze and appointment of a Receiver.
The court granted the request for appointment of a Receiver on June 21st.
The Court has been advised that since the filing of the Emergency Motion and of the underlying Emergency Complaint in the above-captioned action and prior to the hearing thereon, the Plaintiffs served the last known registered agents for Defendants With copies of the Emergency Complaint, the Emergency Motion, and the Notice of Hearing relating to the Emergency Motion.
All statements of fact in this order are based on the affidavits provided by the Plaintiffs.
In the instant case, the investor Plaintiffs were induced by Defendants to invest in Defendants’ purported investment scheme.
In addition to Plaintiffs, Plaintiffs’ counsel have provided a declaration attesting that they represent over 160 additional clients who invested in the Defendants’ investment scheme.
SCOTT DIMOND, Esq. is appointed the Receiver (the “Receiver”) of EMPIRES X CORP. EMPIRES CONSULTING CORP, and EMPX MANAGEMENT LLC, and all other entities operated, controlled or otherwise associated with the Defendants’ activities, which entities shall be deemed to be included in the term “Receivership Entities” and shall serve until further Order of this Court.
In a nutshell, the EmpiresX Receiver is now in charge EmpiresX and its assets.
Thus far the EmpiresX Receiver has
- subpoenaed TD Bank, CoinBase and GoDaddy for EmpiresX related records (June 24th)
- subpoenaed Emerson Pires, Flavio Goncalves and Joshua David Nicholas for Empires X related records (July 1st)
One interesting point to note is service on Pires, Goncalves and Nicholas, has been executed at known Florida addresses.
This is at odds with Nicholas believed to be in custody following his indictment. Both the SEC and CFTC maintain Pires and Goncalves have fled to Brazil.
On July 21st the EmpiresX Receiver filed his first Status Report. In the report the Receiver advised the court
- TD Bank “has not located documents responsive to the Receiver’s request”;
- Coinbase has located responsive documents but has proposed an entry of confidentiality prior to turning them over;
- GoDaddy has confirmed it will cooperate with turning over EmpiresX’s website domain to the Receiver;
- Interactive Brokers Corp had been subpoenaed on July 1st but had yet to respond;
- the EmpiresX Receivership was in communication with both the SEC and CFTC regarding their respective civil cases, with a decision on how both regulators will proceed regarding the Receivership pending; and
- in line with the SEC’s and CFTC’s assertions, Pires and Goncalves “have disappeared and are believed to have fled to another country”.
The Receiver has not yet been able to take custody, possession, or control of any of the Receivership Entities.
To date, no substantial assets have been located with respect to banking accounts, brokerage accounts, or cryptocurrency wallets that are in the custody, control, possession, or ownership of the Receivership Entities.
The Receiver will continue to make efforts to take custody, possession, or control of the Receivership Entities’ assets.
On August 18th the EmpiresX Receiver filed a Motion to Compel, following Interactive Brokers Corp failure to respond to the Receiver’s subpoena.
While it is not unusual for banking entities to be untimely responding such subpoenas, more than five weeks have passed since the July 8, 2022 return date and IAB has neither responded nor even contacted the Receiver to discuss the Subpoena.
Based upon its failure to appear, this Court should enter an order compelling IAB to produce the requested documents and immediately to show cause as to why IAB should not be sanctioned for its failure to comply with the Subpoena.
A hearing on the Receiver’s IAB show cause motion has been scheduled for August 26th.
On August 18th the Receiver also filed his Second Status Report with the court.
In the report, the Receiver informed the court
- with the cooperation of GoDaddy he had taken possession of EmpiresX’s website domain and disabled it;
- he had reached an agreement with Coinbase on confidentiality, who had since gone on to provide the Receiver with requested production;
- he was still in communication with the SEC and CFTC, neither of which had reached a decision on how to handle the Receivership situation; and
- there had been no change with respect to recovering EmpiresX assets from the previous report.
On August 22nd the previously scheduled August 26th IAB show cause hearing was rescheduled for August 24th (later today). Note that the August 26th hearing still appears scheduled on the case docket.
Looking forward, an Initial Case Management Conference has been scheduled for September 12th. Pending the outcome of the scheduled show cause hearing today, I’ll provide an update below.
Typically when it comes to adversary proceedings, the pecking order is DOJ (criminal) –> federal regulators (SEC, DOJ) –> civil litigation (typically investors trying to get their money back).
The DOJ intervenes in federal regulatory cases and has them stayed, and federal regulators do the same with civil proceedings.
At least that’s how things normally go. What we have here is the first MLM fraud case I’ve seen where a state-level court has independently ordered the appointment of a Receivership, as part of victim civil proceedings.
I suspect the SEC and CFTC (or possibly the DOJ) will intervene at some point but, for now at least, that hasn’t happened yet.
Before anyone who lost money in EmpiresX asks, no you can’t join the class-action yet.
In the unexpected event EmpiresX class certification is granted, or the case is stayed, we’ll keep you posted.
Update 25th August 2022 – Interactive Brokers Corp has been ordered to comply with the EmpiresX Receiver’s production subpoena.
As of August 24th, Interactive Brokers Corp has ten days to comply or explain to the court why they shouldn’t be held in contempt.
Update 28th September 2022 – As disclosed by the EmpiresX Receiver in his Third Status Report, Interactive Brokers Corp has complied with the subpoena.
This has lead to the finding of $198,000 the Receiver belongs to the Receivership.
The Receiver is in the process of having these funds transferred to a Receivership account.
Additional EmpiresX related accounts have also been tracked down at Bank of America Corporation, Wells Fargo Bank, N.A., JP Morgan Chase, N.A., Suncoast Credit Union, and PNC Bank.
The Receiver has contacted each of these institutions to determine the status and balance of each account as well as obtain copies of any account documentation.
The Receiver’s discussions with Coinbase, the SEC and CFTC continue.
The Receiver’s Third Status Report was filed on September 20th, 2022.