EmpireX Capital Alleged Ponzi Scheme

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EmpireX Website

EmpireX Capital claimed to be established in 2012 and a pioneer in crypto asset management. The company claimed to have offices in New York, Miami, and Hong Kong, and positioned itself as a crypto private fund offering investment services to institutional and accredited investors. The firm emphasized providing a smooth investment experience and customized plans for financial growth, diversifying into the best digital assets. The scheme accumulated $6.6m in capital between July 2018 and March 2023. However, the SEC has filed an action against EmpireX Capital, its owner Rafael Alberto Vargas Gonzalez, his sister Paola A. Vargas, and AKC Management LLC. Allegedly, Vargas misappropriated around $1.8 million for personal uses, including jewelry, housing, and luxury automobile payments, did not make significant investments on behalf of customers, and payments made in the scheme were not derived from profits.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

About EmpireX Capital

"Empirex Capital is pioneer in crypto asset management [claiming to be] in the United States since 2012." "Empirex Capital LLC was established in 2012 as a private investment fund in New York, United States." "1200 Ponce de Leon, Suite 900 Coral Gables, FL 33134." "Our offices are located in New York, Miami, and Hong Kong. Empirex Capital will continue expanding, with the purpose of bringing unique investment opportunities around the world."

"Crypto Private Fund. Providing investment services to institutional and accredited investors." "The opportunity to participate in the crypto market is easily within your reach. Our team will guide you so your investment experience is smooth and we will customize the best plan to achieve your financial growth." "Our team diversifies only on the best digital assets and customizes specific strategies based on this highly volatile and profitable market."

“Remember That a Good Financial Decision Can Be Your Best Ally Towards Success.” - Rafael Vargas, Founder and CEO

"Rafael adds real value to people looking to increase their investments. The 21st century is a brave new world for investors, which while very exciting, can easily become overwhelming. Rafael and our team of investment experts constantly study markets and trends to provide our clients with investment advice that best suits their personal finances."

"The investor, together with an Empirex Capital advisor, will define the objectives that he wishes to achieve with the investment. These objectives will result in the increase of capital in a given time or the generation of additional income, favoring cash flow. Likewise, it will be determined if the investor is accredited and complies with all the regulations to be able to invest in the company. For his part, the advisor will present the available return portfolios, both variable and fixed income."

"Establishing the investment period. It will be determined whether the type of investment is aggressive or moderate, from which the times of the investment will be established, whether for 3, 6 or 12 months. The financial strategies of Empirex Capital are proposed in accordance with the time previously established by the investor."

"Establishing an investment agreement. Empirex Capital will generate an electronic agreement that the investor must sign. This agreement describes the amount of the investment, its duration and the type of plan previously chosen by the investor."

"Beginning of investment. At this point, Empirex Capital's specialized team will start working on selecting the best digital assets and executing the established strategies. The team will focus on taking advantage of market volatility, diversifying into different financial niches, in order to maximize profits."

"Investment maturity. Once the agreed period has expired and the operations have closed, Empirex Capital will determine the total profits obtained from this investment. Empirex Capital will notify the investor of their investment results, as well as the delivery times of the profits obtained. Likewise, the advisor will inform and guide the investor in case he wishes to reinvest or withdraw both the initial capital and the profits generated. In case of reinvestment, a new agreement will be established."

"Our exclusive team of Asset Management professionals thoroughly studies the market trends as to create personalized strategies and diversify your portfolio in the best Crypto-Assets. Our strategies allow us to be profitable and to take advantage of volatility, regardless of market direction."

"An Empirex Capital Ambassador is the person who refers clients to our company and receives a commission from this connection."

"The contents of this Website are intended solely for the addressee(s) and may contain privileged information of Empirex Capital LLC and may legally protected from disclosure. There are risks associated with investing in cryptocurrencies. Investing in crypto assets involves the risk of loss. Loss of principal is possible. Some high-risk investments may use leverage, which will accentuate gain & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. An investor may get back less than the amount invested. Information on past performance, where given, is not necessarily a guide to future performance. Or: The capital value of units in the fund can fluctuate and the price of units can go down as well as up and is not guaranteed. Therefore, you should never invest any money that you might need for living or for company expenses, expressing this you agreed that this is a risking capital."

"From July 2018 through at least March 2023, the Defendants raised at least $6.6 million from at least 162 investors, in the United States and abroad, by making repeated material misrepresentations and receiving compensation for making investment advisement decisions for these investors."

"The misrepresentations concerned Vargas’s and Empirex’s use of assets obtained from investors, the profitability of Empirex’s trading activities, Empirex’s assets under" "management, Vargas’s and Empirex’s qualifications to manage investors’ assets and their backgrounds, and the risks of investing with Empirex."

"[T]he Defendants misled investors as to the profitability of their investments by making and facilitating Ponzi-like payments to the investors to mask Empirex’s failure to generate sufficient profits in trading investors’ assets in what they termed “traditional” investments, investments in crypto assets, or a combination of both. And, when confronted by investors after they stopped receiving returns, Vargas repeatedly lied to them that he would return the entirety of the funds owed to them."

On August 31st, 2022, "The Securities and Exchange Commission announced it filed an action against Empirex Capital LLC, a Coral Gables, Florida company, its sole owner and manager Rafael Alberto Vargas Gonzalez ("Rafael Vargas"), his sister Paola A. Vargas and an entity she managed, AKC Management LLC, seeking an order directing them to comply with investigative subpoenas for documents or testimony."

"According to the SEC's application, filed in U.S. District Court for the Southern District of Florida, the SEC is investigating whether Empirex, its officers and others violated the federal securities laws in connection with an unregistered securities offering. The filing states evidence uncovered in the investigation indicates Empirex and Rafael Vargas may have used AKC - a limited liability company created by Paola Vargas - to raise funds from investors to funnel to Empirex. As stated in the filing, SEC staff served Empirex, Rafael Vargas, and AKC with investigative subpoenas requiring the production of certain documents and served Paola Vargas with an investigative subpoena compelling her testimony. According to the filing, despite multiple accommodations by the SEC, Empirex, Rafael Vargas and AKC have failed to comply with the document production obligations of the subpoenas and Paola Vargas has failed and refused to comply with the testimonial obligation of the subpoena."

The complaint alleges that "[t]hrough Defendants’ fraud Vargas misappropriated approximately $1.8 million, using funds obtained from investors to pay for various personal uses, including jewelry purchases, housing, and luxury automobile payments, and for cash."

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - EmpireX Capital Alleged Ponzi Scheme

Date	Event	Description
August 30th, 2022	Subpoena Enforcement Action	"The Securities and Exchange Commission announced it filed an action against Empirex Capital LLC, a Coral Gables, Florida company, its sole owner and manager Rafael Alberto Vargas Gonzalez ("Rafael Vargas"), his sister Paola A. Vargas and an entity she managed, AKC Management LLC, seeking an order directing them to comply with investigative subpoenas for documents or testimony."
September 2nd, 2022	EmpireX Attorney	"NOTICE of Attorney Appearance by David Stuart Weinstein on behalf of Empirex Capital LLC, Rafael Alberto Vargas Gonzalez. Attorney David Stuart Weinstein added to party Empirex Capital LLC(pty:dft), Attorney David Stuart Weinstein added to party Rafael Alberto Vargas Gonzalez(pty:dft). (Weinstein, David)"
October 7th, 2022	Emergency Motion	"EMERGENCY MOTION with Certification of Emergency included for Enlargement of Time to Respond to Show Cause Order by AKC Management LLC, Paola A. Vargas. Responses due by 10/21/2022 (Attachments: #1 Certification Certification of Emergency)(Udolf, Bruce)"
October 7th, 2022 3:53:00 PM MDT	Final Twitter Post	The final post on Twitter explains "the 4 types of wealth that you should focus on, so you will see how you are achieving the goals you long for".
April 1st, 2023 2:06:47 PM MDT	Website Capture	The EmpireX Capital website is still online, "[p]roviding investment services to institutional and accredited investors."
June 13th, 2023 12:33:18 AM MDT	Website Capture	The website appears to be offline with an error that "This domain does not yet support HTTPS. Please add an SSL Certificate. You can find more information in the SSL guide"
September 21st, 2023	SEC Complaint Filed	"The Securities and Exchange Commission announced today it filed an action against Empirex Capital LLC and its owner and manager, Florida resident Rafael Alberto Vargas Gonzalez a/k/a Rafael Vargas."

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $6,600,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.