EmpiresX sued for $41.6 mill in commodities fraud by CFTC
The Commodity Futures Trading Commission has sued EmpiresX and its executives for “at least $41.6 million” in fraud.
The CFTC’s lawsuit was filed in parallel with an SEC civil fraud lawsuit pertaining to the same conduct.
Named defendants in the CFTC’s lawsuit are Empires Consulting Corp, Emerson Pires, Flavio Goncalves and Joshua Nicholas.
As alleged by the regulator;
Beginning in at least September 2020 and continuing through the present Emerson Pires, Flavio Goncalves, Joshua Nicholas and Empires Consulting Corp. … have engaged in an ongoing scheme through which they fraudulently solicited individuals in the United States and elsewhere to trade commodity futures, options, and digital assets, among other products, through commodity interest pools under the name EmpiresX.
In connection with this fraudulent scheme, Defendants have accepted and pooled at least $41.6 million from over 12,500 individuals, including at least $14.3 million from over 2,300 individuals in the United States.
Just $1 million of the “at least” $41.6 million invested into EmpiresX was used for trading… and completely lost.
Between them, Pires, Goncalves and Nicholas
misappropriated at least $5 million in participant funds for improper, non-investment purposes, including luxury travel, dining, car leases, shopping, and cash withdrawals.
Fraud identified by the CFTC pertains to EmpiresX running a “commodity pool”, in violation of the Commodity Exchange Act.
Allegations pertaining to EmpiresX’s illegal conduct largely mirror those already covered in our SEC lawsuit coverage – but within the context of CEA violations, as opposed to the Securities and Exchange Act.
On April 5, 2021, Pires opened a futures trading account with the Account ID of xxxx5996 in the name of Empires Consulting.
In the account opening documents, Pires represented that Empires Consulting had an estimated liquid net worth of between one and five million, identified himself as the “owner-signatory, trader,” and stated that he had over ten years of “extensive” experience trading options, commodities, and stocks.
In connection the account opening process, Pires described Empires Consulting as follows:
“We specialize in management consulting where we aid business restructure debt and iMovie cash flows to further scale profit.”
When asked if Empires Consulting was required to be registered as a CPO or CTA, Pires responded no, and he further confirmed that the account “will not be used to manage, custody, or pool client funds and the assets are solely [the] property of the applicant.”
On April 18, 2021, and in response to a query from the firm carrying the EX Trading Account, Pires represented that he is the “owner of Empires Consulting Corp and I confirm that I do not accept or solicit funds from outside investors.”
In aggregate, Defendants caused $9,477,715 to be deposited into the Bank A Account between November 2, 2020 and February 22, 2022, including at least $8 million in funds received from pool participants.
Of the approximately $9.4 million deposited into the Bank A Account, only approximately $1 million was transferred to the EX Trading Account.
During the weekly videoconferences, Pires, Goncalves, and Nicholas each repeatedly represented that participant funds were being traded through what they claimed was an EmpiresX account with a well-known online electronic trading platform that offered trading in futures contracts, stocks, exchange-traded funds, and other assets.
In fact, EmpiresX did not have an account with that electronic trading platform.
Goncalves had registered and, on information and belief, designed a website that mimicked the trading platform’s website, including using the same format and marks used by the platform.
Defendants created and disseminated images of this fake website to induce participants to invest by misleading them into thinking that the EX Bot was actually trading their money.
Defendants also misrepresented the EmpiresX pools’ performance.
When a participant logged in to their EmpiresX accounts, they were shown account balances including positive investment returns and affiliate program income.
These amounts were false, and did not reflect trading in the participant’s account or income actually received.
Given both the CFTC and SEC have pegged EmpiresX’s Ponzi scheme at about $40 million, it’s interesting to note Flavio Goncalves’ withdrawal claims.
In a video made on or around September 2, 2021, Goncalves falsely stated that EmpiresX had paid participants about $57 million of withdrawals and was at the time averaging about $6 million per week in payouts to participants.
There is no indication, aside from Goncalves’s statements, that EmpiresX actually paid significant funds to pool participants.
And as the EmpiresX Defendants lied about registering with the SEC, so too did they lie about having a trading license.
In a video distributed to EmpiresX participants and prospective participants on or about July 30, 2021, Nicholas represented that he and EmpiresX had the appropriate licenses to trade on behalf of others, saying: “If you’re going to represent people, you need your
representation license. And so, that’s what we have . . . . It’s very much real.”
In fact, neither Nicholas nor anyone else affiliated with EmpiresX had obtained the required registration or license for the EmpiresX commodity pools, Empires Consulting, or themselves.
As covered here on BehindMLM, EmpiresX began to collapse in October 2021.
Unbeknownst to us, EmpiresX’s collapse began with a “regulators!” exit-scam.
Beginning in or around October 2021, Defendants directed EmpiresX participants and promoters to remove from the internet and delete any videos promoting EmpiresX.
Nicholas called certain participants and directed them to delete any promotional videos regarding EmpiresX.
In a notice posted on the EmpiresX website, Defendants stated that promotional materials “need[ed] to be revised and authorised by regulatory authorities in order to be posted in any internet platform or marketing material,” and that EmpiresX had “been notified of these
actions that need to be taken in order for the company to avoid issues with its registrations and processing.”
Defendants threatened to block participants’ accounts if they did not remove or delete the videos.
Defendants had not received any notice from the CFTC or the SEC regarding their marketing materials, registrations, or processing, nor, upon information and belief, had they been notified by any other regulatory agency or authority.
When the EmpiresX Defendants were later subpoenaed by US authorities, Pires and Goncalves fled to Brazil. Joshua Nicholas is believed to have stayed in the US but his current status is unclear.
The CFTC’s Complaint details five counts of fraud, all pertaining to violations of the Commodities Act.
The CFTS has asked the court to
- confirm the alleged fraud;
- enter a permanent injunction against the EmpiresX Defendants;
- order the EmpiresX Defendants to disgorge ill-gotten gains;
- order the EmpiresX Defendants to pay restitution to their victims;
- issue a civil monetary penalty; and
- pay the CFTC’s legal costs and fees.
BehindMLM is tracking both the SEC’s and CFTC’s EmpiresX fraud cases.
Emerson Pires, Flavio Goncalves and Joshua Nicholas have also been indicted on related criminal charges. BehindMLM’s coverage of the EmpiresX indictments is pending.
Update 1st July 2022 – BehindMLM’s coverage of the EmpiresX indictments is now live.