EmpiresX Ponzi Scheme

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EmpiresX

EmpiresX promoted itself to investors primarily located in Florida, promising an easy "investment in the financial market, options, stock exchanges, trade and cryptocurrencies". They claimed to have an artificial intelligence trading bot named Robot EX which was capable of generating returns for investors, when in reality the scheme was merely a standard ponzi scheme operation. Overall, there was approximately $100m invested in the platform, and while at least one of the founders has pleaded guilty, the case is ongoing and it is unclear how much money will ultimately be recoverable.

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

About EmpiresX

"The time has come to achieve financial independence!"

EmpiresX "launched a web-based platform in 2020 that was targeted to South Florida consumers (mostly Spanish speakers) as an investment opportunity for trading in cryptocurrency. It was marketed as an “opportunity to participate in the best experience of investing in a safe and efficient platform.”"

"It's simple, It's profitable, It's real, It's for you!"

"Here you have investment in the financial market, options, stock exchanges, trade and cryptocurrencies."

"Reach a new level of investment, with security and financial growth. Have you thought about increasing your capital with transparency and all possible security? This is our mission! Bring you software created by world-class professionals, which will help you manage and multiply your assets. We are here to revolutionize the market."

"Proven by years of testing. To guarantee functionality, our software has been tested for years and is constantly improving and adapting to different market fluctuations. Developed by the best analysts. Count on the best strategies of the best analysts on the market."

"Weekly income with withdrawals every Monday. Instant withdrawal. Receipts and cryptocurrency payments."

"EmpiresX was created in order to help, multiply and transform. The company has not existed officially since 2017, since when the 2 partners started trading with crypto. Officially, after a lot of learning, a lot of partnership, a lot of evolution, EmpiresX was launched in 2020 in the middle of the pandemic."

"We have the strength and partnerships of several financial institutions around the world, which allows us to build a direct connection and a safe choice for your portfolio, bringing the maximum possible return. Using our software you can become a successful trader and still have control over your own capital at all times, with complete transparency."

"The main selling point of the EMPIRES-X PLATFORM was a trading bot, called “Ex Bot” or “Bin Bot,” which, potential investors were told, was an algorithm that utilized artificial intelligence to conduct day trading activities for investors to generate a return on their investment (“ROI”). As marketed to consumers, this feature distinguished the platform from other competitors because it generated a 1% ROI for the customer on a daily basis, seven days a week."

"Start by creating your EmpiresX account. Click on the "Register" button." "Log in to the platform and purchase the annual subscription of Robot EX." "Connect the robot with your broker and add the funds." "Start your experience towards success and have the best results in the financial market with total security."

"Why should [I] choose Empires X? Because it is simple, it is profitable, it is real and it is for you! It is very easy and simple to purchase our services. We are present in more than 16 countries, operating close to you. At EmpiresX, everyone can invest safely and profitably."

"Emerson S. Piresis an individual resident of the City of Fort Myers, located within Lee County, Florida. Pires is the founder and President of EMPIRES X CORP, and the President of Empires Consulting Corp and EMPX MANAGEMENT LLC." "Flavio M. Goncalves is an individual resident of the City of Fort Myers, located within Lee County, Florida. Pires is the co-founder of EMPIRES X CORP, and the Vice-President of Empires Consulting Corp and of EMPX MANAGEMENT LLC." "Joshua David Nicholas is an individual resident of the City of Stuart, located within Martin County, Florida."

"Pires and Goncalves were at the forefront of EMPIRES-X and are listed as the “co-founders” of EMPIRES-X CORP. Pires was described as “an experienced market analyst and advisor” who had “years of business, traditional markets and cryptocurrency portfolio management.” Goncalves was said to hold various degrees, own multiple companies, and was part of ongoing research projects, including one that focused on ending Alzheimer’s disease."

"Also prominent to EMPIRES-X was Defendant Nicholas (“Defendant Nicholas” or “Gregg”), who was introduced and then widely known to potential and existing investors under the alias, Joshua Nicholas Gregg. Gregg was often referred to as the “Master Trader” of EMPIRES-X. Investors were told that he was the “brains” behind the creation of the Bot and had created it using his knowledge and experience from working for Goldman Sachs in New York. As shown in the post below posted on the EMPIRES-X Facebook page, in the EMPIRES-X community, he was known as a “trading genius”."

EmpiresX "reassured investors that Gregg was registered with the Securities and Exchange Commission (SEC) and even included his broker page and credentials on EMPIRES-X’s corporate documents for members to review to impart an indicia of validity and credibility to their false claims."

"To imbue EMPIRES-X with legitimacy, EMPIRES-X DEFENDANTS represented to EMPIRES-X investors that the transactions on the EMPIRES-X PLATFORM were regulated by not only the SEC, but also the Commodity Futures Trading Commission (CFTC), the Federal Reserve, and other regulatory organizations like the Financial Industry Regulatory Authority (FINRA)."

"EMPIRES-X DEFENDANTS urged potential investors that “this was the time to invest” because EMPIRES-X was at its moment of peak growth. They relayed to users that EMPIRES-X was conducting business worldwide - in five continents and over 50 countries with offices in the United States, Latin America, and even Dubai. According to EMPIRES-X DEFENDANTS, EMPIRES-X was not only extremely profitable, but it was having an unspecified “monthly growth” of 30% and expectations of 6000% total growth by 2023. Defendant Pires told potential investors: “In three months when you join this company, you have pretty much the chance to double your money.”

EmpiresX would "hold Zoom meetings where they would share “tips” on investing. These meetings sometimes depicted the EMPIRES-X DEFENDANTS from their offices in Miami, and on one occasion, investors were told that EMPIRES-X DEFENDANTS were logging in for the meeting from Dubai, where they had been invited to give a presentation on investing."

"The EMPIRES-X DEFENDANTS represented that signing up to use the EMPIRES-X Platform and investing with the “Bot” was easy. After registering, the user was locked into a 12-month contract with EMPIRES-X." "Investors first had to “purchase” or “rent” the Bot by making an initial investment (usually in the amount of $400 to be able to receive up to 1% ROI per day, or alternatively, in the amount of $200 to be able to receive up to 0.6% ROI per day). Then, investors had to deposit funds (no less than $500) for the Bot to use for conducting trades. In addition to these, investors were required to periodically deposit additional funds to purchase “credits,” which would cover the “Bot fee” (essentially, an administration fee), which was 20% of the investor’s daily profit. Investors had the option to make the payments either in USDT (USD Tether), BTC (Bitcoin), or ETH (Ether)."

"Investors were told that profits made from trading with the Bot would be paid weekly, on Mondays. Investors were also reassured by EMPIRES-X DEFENDANTS that they could liquidate their investment at any time (with the exception of a 20% “penalty” fee that applied for withdrawals done within the first month). To make a request for withdrawal, investors submitted a withdrawal request on the EMPIRES-X PLATFORM’S “back office” (where investors managed their accounts), which, when approved by the company, would transfer the requested amount into their crypto wallets. The withdrawals would be processed weekly, on Fridays, and landed in the designated account the following Tuesday. But, instead of withdrawing, investors were encouraged to “compound” their investment to “make thousands turn into millions in a matter of months!”"

"In addition to the Bot, EMPIRES-X DEFENDANTS gave investors an opportunity to make even more money. “Affiliates” (who were individuals who had invested $200 and were expected to make up to 0.6% a day on their investment) had seven different “levels” of membership: invest $500 and recruit at least one affiliate investor, invest $1,000 and recruit at least two affiliate investors, et cetera, up to “rank 7” which required the user to invest $5,000 and recruit at least seven affiliate investors to join EMPIRES-X."

"EMPIRES-X DEFENDANTS also offered a “career bonus” program to the affiliates when they generated certain amounts of money in “unilevel team investment volume,” under which affiliates could earn titles such as “bronze trader,” “emerald trader,” etc. and expect to receive luxury prizes such as watches, cars, or travel vouchers, as promoted by EMPIRES-X DEFENDANTS in marketing materials distributed to consumers."

The Reality

"Payments from investors went directly to EMPIRES-X’s and/or EMPIRES-X or Non-defendants’ COINBASE account(s). The company provided users with the information to the designated wallet(s), including those maintained by COINBASE." "A video demonstrating how to purportedly transfer funds to the EMPIRES-X PLATFORM reveals that investors were actually asked to simply transfer their funds into a COINBASE account owned and/or controlled by EMPIRES-X DEFENDANTS."

"In reality, the “Bot” was a lie. There was never any algorithm using artificial intelligence to conduct trades on behalf of EMPIRES-X investors. Upon information and belief, no trading activity ever actually occurred for the benefit of the EMPIRES-X investors, other than the EMPIRES-X DEFENDANTS’ scheme to accumulate as many deposits from investors as possible into the COINBASE account, which the EMPIRES-X DEFENDANTS either used to make payments to older investors to keep the scheme running, or to otherwise pay themselves exorbitant amounts of money to fund their own lavish lifestyles at the expense of, in many cases, the life savings of the investors they were taking advantage of."

"As with all Ponzi schemes, because EMPIRES-X’S source of revenue depended on recruiting new members who would transfer money to EMPIRES-X for “investment,” when membership slowed down, EMPIRES-X faced a shortfall. As a result, EMPIRES-X DEFENDANTS implemented “changes” to the EMPIRES-X PLATFORM to attempt to deter investors from withdrawing funds."

What Happened

EmpireX investors found that there were technical challenges in September 2021. In October of 2021, withdrawals were fully disabled.

Key Event Timeline - EmpiresX Ponzi Scheme

Date	Event	Description
January 30th, 2020	EmpiresX Incorporated	"EMPIRESX CORP is a corporation that was incorporated in the state of Florida on January 30, 2020, with a principal place of business at 9700 Casa Linda Court, Fort Myers, Florida 33919. EMPIRES X CORP is a citizen and resident of the State of Florida."
September 19, 2020	EmpiresX Dissolved	"EMPIRES X CORP filed for dissolution on September 19, 2020."
October 14, 2020	Empires Consulting Incorporated	"EMPIRES CONSULTING CORP. is a corporation that was incorporated in the state of Florida on October 14, 2020, with a principal place of business at 9700 Casa Linda Court, Fort Myers, Florida 33919. Empires Consulting Group is a citizen and resident of the State of Florida."
June 9, 2021	EmpX Management LLC Incorporated	"EMPX MANAGEMENT LLC is a corporation that was incorporated in the state of Florida on June 9, 2021, with a principal place of business at 1855 SE Port Saint Lucie Blvd, Port Saint Lucie, Florida 34952. EMPX MANAGEMENT LLC is a citizen and resident of the State of Florida."
November 2nd, 2021 6:21:07 AM MDT	Video on Account Funding Process	Mr 1 Step publishes a YouTube video on how to fund your EmpireX account. In this video, Kevin from EmpireX explains the process of funding an account on the platform. He starts by clicking on the "Let's Invest" button and then proceeds to the "Xbox Deposit" page. He enters an order for $1,000 and generates an order. The video shows the EmpireX address where the BTC transfer should be made. Kevin copies the address and goes to his BTC wallet to initiate the transfer. He calculates the network fee and adds it to the amount he wants to send. After confirming the transaction, he mentions that it may take around 30 minutes for the BTC to appear in the EmpireX account. However, in the outro, Kevin updates that, due to compliance reasons, it might take a few days for the funds to land in the account since they need to convert the BTC into fiat currency. He assures viewers that this is normal and concludes by summarizing the funding process and wishing everyone a great day.
January 28th, 2022	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
August 30th, 2022	Preliminary Apprival of Settlement
September 12th, 2022 3:04:00 AM MDT	Guilty Plea	Crypto News reports that Joshua David Nicholas, a 28-year-old man from Florida, has pleaded guilty to conspiracy to commit securities fraud in connection with a crypto Ponzi scheme that defrauded investors of approximately $100 million. Nicholas was the "Head Trader" at EmpiresX. They made false promises of guaranteed returns using a proprietary trading bot that employed artificial and human intelligence. In reality, EmpiresX operated as a Ponzi scheme, using funds from new investors to pay earlier investors. EmpiresX, also known as Empires Consulting Corp., had not registered its investment program with the US Securities and Exchange Commission as required by law. Victims of the fraud can visit a dedicated website for information about their rights. Nicholas now faces a maximum of five years in prison after pleading guilty to one count of conspiracy to commit securities fraud. The case was investigated by the FBI Miami Field Office and Homeland Security Investigations' Miami Field Office. The sentencing date has yet to be scheduled. Co-conspirators Emerson Pires and Flavio Goncalves, both Brazilian nationals, were also charged in the case..
October 27th, 2022	Final Approval Hearing

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 $100,000,000 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?

Withdrawal Fee Penalty Increased

"The first adjustment occurred in September 2021. EMPIRES-X increased the fee penalty for withdrawing within the first month of investing from 20% to 40%. Soon after, EMPIRES-X DEFENDANTS restricted investors from being able to withdraw “at any time” as they had been told when signing up, to only once a month and even warned investors that their accounts would be cancelled after three withdrawals were made." "Investors also began experiencing other issues, such as commissions and profits that suddenly disappeared from their accounts and for newly signed investors, investments that were not being credited to their accounts." "Investors’ only recourse in resolving these issues was to submit “tickets” to the EMPIRES-X “support” team."

"EMPIRES-X DEFENDANTS told investors that the “IT team” was working on resolving the problems and that delays were likely due to the fact that EMPIRES-X had just submitted their “license” with the SEC."

Withdrawal Requests Disabled

"October 2021, requests for withdrawals were completely disabled for investors. Nor did EMPIRES-X DEFENDANTS process or issue any payments to investors in November 2021. Once again, EMPIRES-X DEFENDANTS told investors that the reason was because the “license” submitted to the SEC was still pending approval."

"Investors continued to experience issues on their EMPIRES-X accounts through the end of December 2021 but were told by EMPIRES-X DEFENDANTS to continue to be patient and not worry about their money because EMPIRES-X was going to pay the investors all money owed. More importantly, EMPIRES-X DEFENDANTS encouraged investors to continue investing with the Bot."

Ultimate Outcome

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

Public Announcement to Investors

"In January of 2022, a public announcement was made to investors which informed them that EMPIRES-X would be dissolving because “some stakeholders ha[d] violated standards and acted in ways that purport to harm the company” but that the company would be returning funds to its investors." "Despite multiple requests from thousands of Class Members, investors’ funds were never distributed back to investors. In fact, the requests submitted for withdrawal continue to show as “pending” on most of the accounts and investors’ petitions to reach the “support team” at EMPIRES-X have gone unanswered."

Class Action Complaint Filed

A class action complaint was filed against EmpiresX on June 10th, 2022. At the time, the case noted that "[t]hese experienced criminals—who have recently fled and are on the run with Plaintiffs’ and Class Members’ money—were only able to steal tens of millions of dollars with the willing assistance of other “reputable” accomplices." "Upon information and belief, Defendant Pires recently fled to Brazil, where he is a citizen. Upon information and belief, Defendant Goncalves recently fled to Dubai, where he may also be a citizen." "the EMPIRES-X website continue[d] to advertise to potential users, including the option for new users to register."

Arrest/Conviction Of Ringleaders

On June 30th, 2022, "The Justice Department announced separate charges against three individuals who allegedly raised more than $100 million in [the EmpiresX] Ponzi scheme. Emerson Pires and Flavio Goncalves, both of Brazil, are accused of founding a fraudulent crypto investment platform with Florida resident Joshua David Nicholas acting as “head trader.” "The trio promoted EmpiresX, a digital assets investment platform, and an unregistered securities offering. They are being charged with conspiracy to commit wire fraud. The two Brazilians could face up to 45 years sentence, while Nicholas could face 25 years if convicted."

"Emerson Pires, 33, and Flavio Goncalves, 33, both of Brazil, and Joshua David Nicholas, 28, of Stuart, Florida, were each charged in the Southern District of Florida with one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud in connection with a global cryptocurrency-based Ponzi scheme that generated approximately $100 million from investors. Pires and Goncalves also were charged with conspiracy to commit international money laundering. The indictment alleges that Pires and Goncalves, both founders of EmpiresX, along with Nicholas, the so-called “Head Trader” for EmpiresX, fraudulently promoted EmpiresX, a cryptocurrency investment platform and unregistered securities offering, by making numerous misrepresentations regarding, among other things, a purported proprietary trading bot and fraudulently guaranteeing returns to investors and prospective investors in EmpiresX. As alleged in the indictment, blockchain analytics shows that Pires and Goncalves then laundered investors’ funds through a foreign-based cryptocurrency exchange and operated a Ponzi scheme by paying earlier investors with money obtained from later EmpiresX investors. If convicted of all counts, Pires and Goncalves face up to 45 years in prison and Nicholas faces up to 25 years in prison. FBI and HSI are investigating the case. Fraud Section Trial Attorneys Kevin Lowell and Sara Hallmark and Assistant U.S. Attorney Yisel Valdes of the U.S. Attorney’s Office for the Southern District of Florida are prosecuting the case."

"According to court documents, Joshua David Nicholas, 28, of Stuart, was the “Head Trader” for EmpiresX, a purported cryptocurrency platform. [On September 8th], Nicholas admitted that he and others fraudulently promoted EmpiresX by making numerous misrepresentations regarding, among other things, a purported proprietary trading bot and fraudulent “guaranteed” returns to investors and prospective investors in the company. Nicholas and his co-conspirators claimed that EmpiresX operated a trading bot that used artificial and human intelligence to maximize profitability for investors. Instead, EmpiresX operated a Ponzi scheme by paying earlier investors with money obtained from later EmpiresX investors. In addition, despite representations to the contrary, EmpiresX never registered, nor took steps to register, EmpiresX’s investment program as an offering and sale of securities with the U.S. Securities and Exchange Commission, nor did EmpiresX have a valid exemption from this registration requirement."

"Nicholas pleaded guilty to one count of conspiracy to commit securities fraud and faces a maximum penalty of five years in prison. A sentencing date has not yet been scheduled. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors." "The key issue in this case will not be on liability, but unfortunately on collectability. For this reason, Plaintiffs are also seeking the appointment of a receiver over the EMPIRES-X Defendants."

Crypto News reports that Joshua David Nicholas, a 28-year-old man from Florida, has pleaded guilty to conspiracy to commit securities fraud in connection with a crypto Ponzi scheme that defrauded investors of approximately $100 million. Nicholas was the "Head Trader" at EmpiresX. They made false promises of guaranteed returns using a proprietary trading bot that employed artificial and human intelligence. In reality, EmpiresX operated as a Ponzi scheme, using funds from new investors to pay earlier investors. EmpiresX, also known as Empires Consulting Corp., had not registered its investment program with the US Securities and Exchange Commission as required by law. Victims of the fraud can visit a dedicated website for information about their rights. Nicholas now faces a maximum of five years in prison after pleading guilty to one count of conspiracy to commit securities fraud. The case was investigated by the FBI Miami Field Office and Homeland Security Investigations' Miami Field Office. The sentencing date has yet to be scheduled. Co-conspirators Emerson Pires and Flavio Goncalves, both Brazilian nationals, were also charged in the case..

Total Amount Recovered

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

Ongoing Developments

TBD

Individual Prevention Policies

When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.

Store the majority of funds offline. By offline, it means that the private key and/or seed phrase is exclusively held by you and not connected to any networked device. Examples of offline storage include paper wallets (seed phrase or key written down and deleted from all electronic media), hardware wallets, steel wallet devices, etc...

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

Platform Prevention Policies

Platforms should not operate as a ponzi scheme. Assets should be secured in a multi-signature wallet, with third party validation to find any vulnerabilities.

Do not take customer assets and performing highly risky trades and investments without giving visibility to customers.

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

All aspects of any platform should undergo a regular validation/inspection by experts. This validation should include a security audit of any smart contracts, reporting any risks to the backing (of any customer assets, ensuring treasuries or minting functions are properly secured under the control of a multi-signature wallet, and finding any inadequacies in the level of training or integrity of the team. The recommended interval is twice prior to launch or significant system upgrade, once after 3 months, and every 6 months thereafter. It is recommended that the third party performing the inspection not be repeated within a 14 month period.

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

Regulatory Prevention Policies

Entities where assets do not cover the liabilities which are owed to investors can be found easily through a rotation of third party validators. Ideally, a full audit or Proof of Reserves algorithm could be used, and funds would be secured in a multi-sig treasury with keys held by trustworthy individuals.

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

A greater level of education for consumers can assist them in identifying red flags and avoiding platforms such as EmpireX.

Create a standard tutorial and quiz for all new cryptocurrency participants, which is required to be completed once per participant. This tutorial and quiz should cover the basics of proper seed phrase protection, strong password generation, secure two-factor authentication, common fraud schemes, how to detect and guard against phishing attacks, how ponzi schemes work, as well as other risks which are unique to the cryptocurrency space.

Finally, there is some level of unavoidable risk, and an industry insurance fund can assist users in those cases. This gives flexibility to provide partial relief in a faster manner than a bankruptcy would afford.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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