Trio of fake FinTech drove crypto Ponzi scheme out of Florida

by James · July 3, 2022

MIAMI – Three men raised tens of millions of dollars by convincing crypto investors that they had technology that was able to generate guaranteed returns when they actually ran a Ponzi scheme out of Florida, according to a federal indictment.

The Securities and Exchange Commission accused the trio of using some of the investors’ money to lease a Lamborghini, shop at Tiffany & Co., pay for a second home and cover other personal expenses.

Federal agents investigated Joshua Nicholas of Stuart and Brazilians Emerson Pires and Flavio Goncalves of Port St. Lucie. George Piro, a special agent with the FBI Miami, warned that although FinTech has changed, the type of crime has not.

“What is changing is that they are now pushing their criminal activity into the cryptocurrency area,” Piro said in a statement. “Investors beware. Perform due diligence before investing.”

Nicholas, 28, Pires, 33, and Goncalves, 33, were able to raise at least $ 41.6 million from investors, misused at least $ 5 million and sent only $ 1 million to a brokerage account, according to The Commodity Futures Trading Commission.

Carolyn Welshhans, the acting head of the SEC enforcement division’s cryptoactive and cyber unit, described their fraudulent conspiracy as “an unregistered offer with a series of fraudulent statements designed to lure investors with the prospect of steady daily earnings.”

In 2020, Pires and Goncalves registered Empires Consulting, and Pires registered EmpiresX as Florida profit companies from Fort Myers, state records show. Nicholas pretended to be the head of a trading company that used financial automation technology, and they claimed to run a hedge fund, according to the prosecution.

Investigators found that the fraudsters displayed fake screenshots of EmpiresX’s profitable account with a large, well-known electronic trading platform and created a fake website to mislead investors into believing that EmpiresX was actually trading their money, according to the CFTC.

Meanwhile, the National Futures Association had suspended Nicholas from trading after he was accused of abusing client funds, the hedge fund was not registered and the proprietary trading automated “Ex Bot” that generated 1% daily profits simply did not exist, according to the SEC.

“As with any emerging technology, those who invest in cryptocurrency must beware of profit-making opportunities that seem too good to be true,” said Juan Antonio Gonzalez, an American lawyer for the Southern District of Florida, in a statement.

Pires and Goncalves laundered money through a cryptocurrency exchange and Nicholas’ trading resulted in losses, according to prosecutors. They used the money laundering funds to pay out early investors with newer investors’ money, and their scheme began to collapse by November 2021, according to investigators.

“This case should serve as a warning to all individuals looking at the illicit exploitation of the perceived ambiguity in the crypto market to take advantage of innocent investors,” said Anthony Salisbury, HSI Miami’s special agent, in a statement.

On Thursday, the prosecution announced its criminal case against Nicholas, Pries and Goncalves based on evidence from the FBI and HSI. The SEC and CFTC also announced separate civil enforcement actions.

The SEC’s complaint accuses them of violating the registration and anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

CFTC’s complaint seeks full restitution to fraudulent pool participants, release of any wrongful winnings, civil fines, permanent trade and registration bans, and a permanent injunction against further violations of the Trade Act.

The cases against them are in the U.S. District Court for the Southern District of Florida. Federal agents believe Pires and Goncalves left the United States earlier this year.