The SEC’s EmpiresX civil fraud case has been reopened.

Last October both the SEC’s and CFTC’s parallel EmpiresX civil proceedings were stayed, pending Hague service on co-founder defendants Emerson Pires and Flavio Goncalves.

In March 2023 Brazilian authorities informed the SEC they’d been unable to find Pires and Goncalves.

This prompted the regulator to file for permission to serve the pair via email. That motion was granted on March 29th.

The SEC executed service via email on Pires and Goncalves on March 30th.

Having met the condition that all defendants in the SEC’s EmpiresX case had been served, the court ordered the case reopened on April 4th.

That order saw a response deadline for Goncalves and Pires to answer the SEC’s Complaint set for April 19th. That’s still a week off but it seems unlikely an answer will be filed.

If that winds up being the case, the SEC’s next move will be to request Entry of Defaults against Pires and Goncalves. This will then be followed by motions for default judgment.

EmpiresX as a corporate defendant is a bit complicated due to the appointment of a Receiver in parallel non-regulatory civil proceedings. I haven’t seen this situation before so I’m uncertain yet as to how that will play out.

Individual defendant Joshua Nicholas, who played EmpiresX’s “Master Trader”, has reached a settlement with the SEC.

As I understand it the proposed settlement is awaiting approval by SEC Commissioners.

As previously noted, the CFTC’s parallel proceedings were also stayed last October. Whereas Brazilian authorities have informed the SEC of failed Hague service, notification to the CFTC seems to be lagging behind.

This is from an April 4th Status Report filed by the CFTC;

On December 26, 2022, the Brazilian Central Authority notified the CFTC that it had been unable to effect service on Emerson Pires at the address provided.

To date, the CFTC has not received any communication from the Central Authority regarding the status of service on Flavio Goncalves.

The CFTC anticipates that, after the Brazilian Central Authority advises it regarding service on Flavio Goncalves, the CFTC will seek authority from the Court to serve Pires and Goncalves by publication and other means.

This confirms that, once Brazilian authorities confirm they were unable to locate Goncalves, the CFTC’s EmpiresX case will take the same path as the SEC’s case.

 

Update 29th December 2023 – In a December 1st Status Report, the CFTC advised the court they had still heard nothing back on service of Flavio Goncalves.

On the same day the CFTC also filed for permission to serve Goncalves and Emerson Pires via email. The court approved the motion on December 4th.