A Stuart man acted with two men on a cryptocurrency investment platform to mislead investors and conspire to commit fraud, according to the US attorney’s office.
A federal grand jury in South Florida indicted Joshua David Nicholas, Emerson Pires and Flavio Goncalves on one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud in connection with a global cryptocurrency-based fraud involving generated about $100 million in investor income, the attorney’s office announced Thursday.
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Nicholas, 28, of Stuart, was the so-called head trader for EmpiresX, the crypto platform founded by Pires and Goncalves, according to court documents.
The trio founded EmpiresX in early 2020, with an official office in Miami.
Via Zoom, YouTube, Telegram and Facebook, the men promoted EmpiresX to potential investors.
The men bragged about the “EX BOT,” a proprietary trading “bot” that could generate guaranteed profits, according to the federal court indictment.
Nicholas demonstrated the bot “in action” executing trades on the US Stock Exchange, according to the indictment.
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These demonstrations, however, were fictitious, prosecutors said. And the bot’s representation was false and fraudulent, according to the indictment.
Goncalves and Pires portrayed Nicholas as a “‘cool’ trader,” according to the indictment.
But the company’s chief operating officer fabricated his personal and professional background, prosecutors said.
Nicholas posed as someone else unaffiliated with the company and had concealed a prior 8-year ban by the National Futures Association for investment-related misconduct.
In order to share the profits made with the bot, investors had to open an account with EmpiresX and purchase a license to use the EX BOT for $200 or $400.
Investors funded a separate credit account and additional capital to pool and invest in the bot.
Pires said the separate loans would be “gasoline” for EX BOT and that investors needed to fund it to keep it going, according to the indictment.
But Pires, Goncalves and Nicholas never used a bot to execute trades and make a profit for investors, according to the paperwork.
Instead, in a Ponzi-style scheme, the men laundered investor funds through a foreign-based cryptocurrency exchange and paid early EmpiresX investors with money from later investors, according to the indictment.
The trio also used the money for personal expenses, including exotic vehicles, clothing from high-end retailers and attorney fees, according to the indictment.
Pires, Goncalves and Nicholas never filed or attempted to file the EX BOT as an offer and sale of securities with the SEC. They also did not have a valid exemption from the registration requirement.
The men tricked investors into withdrawing money from their accounts, according to the indictment.
Initially, investors could withdraw money. But as the trio’s ponzi scheme began to collapse, they made it harder for people to get their money out by adding fees to withdrawals and caps on the number of withdrawals that could be made.
On Oct. 21, 2021, the crypto platform held a meeting to claim that they paid $112 million to investors, and within the week prior to that date, they had made 7,000 payments totaling $12 million, all of which were false, they said. The prosecutors.
“He began routinely preventing investors from withdrawing funds from their accounts,” the indictment says.
Since November 2021, investors have largely been unable to withdraw funds from EmpiresX, according to the indictment.
EmpiresX made nearly $100 million in proceeds from duped investors, prosecutors said.
Prosecutors said they will hold crypto fraudsters accountable and warned those looking to invest in new crypto platforms.
“The technology has changed, but the crime remains the same,” said Special Agent George L. Piro, director of the FBI in Miami. “Unscrupulous fraudsters are nothing new in the investment world. What is changing is that they are now pushing their criminal activity into the realm of cryptocurrencies. Attention investors. Please perform your due diligence before investing.”
Mauricio La Plante is a breaking news reporter for TCPalm focusing on Martin County. Follow him on Twitter @mslaplantenews or email him at Mauricio.LaPlante@tcpalm.com.