Florida court demands over $128 million from Brazilian nationals for fraudulent commodity scheme

The U.S. District Court for the Southern District of Florida recently issued a default judgment against Brazilian nationals Emerson Pires and Flavio Goncalves, as well as Florida resident Joshua Nicholas, for their involvement in a fraudulent commodity pool scheme known as EmpiresX. The Commodity Futures Trading Commission (CFTC) brought charges against the three defendants, leading to the court order that requires Pires and Goncalves to collectively pay over $128 million in disgorgement and civil monetary penalties, while Nicholas has to pay $289,000 in disgorgement and $867,000 in penalties. The court also permanently prohibits all three individuals from engaging in any activities that violate the Commodity Exchange Act (CEA) and bars them from registering with the CFTC or trading in CFTC-regulated markets.

The CFTC initially filed a complaint against the defendants in June 2022, which culminated in the recent court order. The complaint detailed how Pires, Goncalves, and Empires Consulting Corporation engaged in fraudulent practices by soliciting individuals to trade commodity futures and options through EmpiresX. The defendants collected funds from more than 12,500 individuals and accepted at least $41.6 million in investments, with Pires and Goncalves retaining over $32 million in illicit gains. False claims were made about the use of participant funds, pool sizes, and returns, and Nicholas even displayed a fake account page to mislead participants about EmpiresX’s trading activities. Eventually, the defendants ceased honoring participant withdrawal requests, leading to the unraveling of the scheme.

In addition to facing civil penalties from the CFTC, Nicholas pleaded guilty to conspiracy to commit securities fraud in connection with EmpiresX in a criminal enforcement action by the Department of Justice. The Securities and Exchange Commission also obtained a default judgment against Pires and Goncalves for their involvement in the scheme, further underscoring the serious nature of their fraudulent activities.

The CFTC highlights the importance of customer protection and has issued several fraud advisories to inform the public about common investment scams, including commodity pool fraud. Customers are urged to verify a company’s registration with the CFTC before committing funds and to report any suspicious activities or violations of commodity trading laws to the Division of Enforcement. The CFTC whistleblower program offers monetary rewards to individuals who provide information about violations of the Commodity Exchange Act, encouraging the public to come forward with any relevant information.

Overall, the recent court order signifies a significant crackdown on fraudulent commodity pool schemes and serves as a warning to individuals engaged in deceptive practices within the financial markets. The penalties levied against Pires, Goncalves, and Nicholas demonstrate the serious consequences of defrauding investors and violating commodity trading regulations.