One of the leading figures convicted of being behind the $100 million crypto “Ponzi” scheme, EmpiresX, has just been sentenced to more than four years in prison by a US court.
The sentencing was handed down to Joshua David Nicholas, the “head trader” of the alleged crypto platform EmpiresX, who will now serve a 51-month prison sentence along with three years of supervised release for his role in the fraudulent scheme.
It follows a guilty plea by Nicholas on Sept. 8 to conspiracy to commit securities fraud.
According to the Department of Justice (DOJ), Nicholas claimed over a two-year period that the platform would make daily “guaranteed” returns using a trading bot that used “artificial and human intelligence” to maximize returns.
In reality, the “bot” was fake, and Nicolas and his associates, Emerson Pires and Flavio Goncalves, ran a “Ponzi” scheme that paid off earlier investors with money from later investors. The DOJ claims blockchain analysis shows Pires and Goncalves, both Brazilian citizens, laundered investors’ funds through a “foreign-based” crypto exchange.
Only about $1 million of investor funds were sent to a futures trading account for EmpiresX, with most funds either lost or misappropriated, according to the Commodity Futures Trading Commission (CFTC), which filed civil actions against the three in June.
At the same time, fraud charges were filed against the three by the Securities and Exchange Commission (SEC), which said investor money was used to lease a Lamborghini from Tiffany & Co. for sale, making a payment on a second home, and more.”
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Investors were also told that EmpiresX is registered with the SEC as a hedge fund and that Nicholas is a licensed trader.
The SEC said the platform was never registered with the Commission and Nicholas was suspended from trading by the National Futures Association for misappropriating client funds.
The scheme lasted for two years, from around September 2020 until early 2022 when it fell apart as the platform refused to honor customer withdrawals who were likely to leave the crypto market due to significant price withdrawals that began at the time .
Pires and Goncalves, who lived in Florida, reportedly began winding down EmpiresX operations in early 2022 and left the U.S. They are now believed to be in Brazil.