The U.S. federal court from Florida has ordered three individuals to pay more than $128 million in penalties for orchestrating a fraudulent commodity trading scheme that ensnared over 12,500 investors through a platform called EmpiresX.

U.S. Court Orders $128 Million Penalty in Major Crypto Trading Scheme

Brazilian nationals Emerson Pires and Flavio Goncalves, along with Florida resident Joshua Nicholas, must pay disgorgement and civil penalties for violating the Commodity Exchange Act, according to the default judgment from the U.S. District Court for the Southern District of Florida.

The court ordered Pires and Goncalves to jointly pay $32 million in disgorgement and $96 million in civil penalties. Nicholas faces separate penalties of $289,000 in disgorgement and $867,000 in civil monetary penalties.

“Nicholas showed pool participants an account page he identified as EmpiresX’s profitable account with a large, well-known electronic trading platform, when in fact EmpiresX had no account with that platform, and defendants created a fake website that mimicked the platform’s website to mislead participants into thinking that EmpiresX was actually trading their funds,” the Commodity Futures Trading Commission (CFTC) explained in a press release published yesterday (Tuesday).

Long-Running Deception

The scheme, which operated from September 2020, involved fraudulent solicitation of individuals to trade commodity futures and options through the EmpiresX platform. The defendants collected at least $41.6 million from investors, with Pires and Goncalves pocketing over $32 million in ill-gotten gains.

By November 2021, the operation began to unravel as the defendants stopped processing withdrawal requests from participants. The court's order permanently bans all three individuals from trading in CFTC-regulated markets and from registering with the commission.

DoJ and SEC

The case has drawn attention from multiple regulatory bodies. Nicholas previously pleaded guilty to conspiracy to commit securities fraud in a parallel criminal case, while the Securities and Exchange Commission secured a separate default judgment against Pires and Goncalves in June 2023.

In 2022, the Department of Justice announced that Nicholas pleaded guilty to conspiracy to commit securities fraud related to a global cryptocurrency-based Ponzi scheme that defrauded investors of approximately $100 million.

Last year, the CFTC secured over $17.1 billion in penalties, restitution, and disgorgement. This record amount includes $2.6 billion in civil monetary penalties and $14.5 billion in disgorgement and restitution, reflecting an increased focus on enforcement across both traditional and emerging markets.