A Florida man pleaded guilty in federal district court on Thursday to participating in a cryptocurrency-based Ponzi scheme that defrauded investors of approximately $100 million, the Department of Justice announced today.
The department says Joshua David Nicholas of Stuart, Florida—population 16,000—acted for nearly two years as the so-called “head trader” of EmpiresX, a cryptocurrency investment platform that promised investors daily profits of one percent thanks to the combined abilities of a state-of-the-art "trading bot” and Nicholas’ manual trading acumen.
In reality, the bot did not exist.
Nicholas, along with EmpiresX co-founders Emerson Sousa Pires and Flavio Mendes Goncalves, took the majority of investors’ funds and leased a Lamborghini, bought numerous items from Tiffany & Co., and made payments on a second home.
According to the Justice Department, the small amount of users’ funds that Nicholas did trade in the cryptocurrency market incurred substantial losses.
Crypto Trader Running $5M 'Ponzi-like' Scheme Faces Nearly 4 Years in Prison: DoJ
Jeremy Spence, a 25-year-old Rhode Island crypto trader, also known as “Coin Signals” on social media channels, has been sentenced to 42 months in prison for defrauding 170 people for more than $5.37 million. According to a Department of Justice (DoJ) press release, Spence operated several crypto investment funds between November 2017 and April 2019, including the Coin Signals Bitmex Fund, the Coin Signals Alternative Fund, and the Coin Signals Alternative Coin Signals Long Term Fund. Investors...
Nicholas today pleaded guilty to one count of conspiracy to commit securities fraud, and faces up to five years in federal prison. Nicholas was also originally charged in June with conspiracy to commit wire fraud, although that charge appears to have since been dropped.
Pires and Goncalves, meanwhile, fled to their native country of Brazil after freezing investor withdrawals earlier this year. They were both nonetheless charged in June with securities fraud and wire fraud, as well as conspiracy to commit international money laundering.
“The technology has changed, but the crime remains the same,” George L. Piro, special agent in charge of the FBI in Miami, said. “Unscrupulous fraudsters are nothing new to the investment world—what’s changing is they are now pushing their criminal activity into the cryptocurrency realm.”
“This case should serve as a warning to any individuals who look to illegally capitalize on the perceived ambiguity of the crypto market to take advantage of innocent investors,” added Anthony Salisbury, Homeland Security Investigations’ Miami special agent in charge.
Parallel to the DOJ’s criminal charges, the SEC filed a civil complaint in June against Nicholas, Pires, and Goncalves. It alleged that the defendants violated both the Securities Act of 1933 and the Securities Exchange Act of 1934, in part for defrauding customers, but also for failing to register EmpiresX as a security.
Binance US Delists Cryptocurrency SEC Claimed Is a Security
Binance's U.S. subsidiary announced that it will shutter trading for Flexa’s AMP token after the U.S. Securities and Exchange Commission (SEC) identified the asset as security. “We operate in a rapidly evolving industry and our listing and delisting processes are designed to be responsive to market and regulatory developments,” Binance US said in a blog post on Monday. The exchange said it is delisting AMP “out of an abundance of caution” effective August 15, adding it is “taking this step now u...
The question of which cryptocurrency-affiliated businesses the U.S. government considers to be securities, and therefore in violation of federal law if unregistered as such, currently looms over the entire crypto space, not just Ponzi schemes.
Just today, SEC chair Gary Gensler made explicit his belief that several cryptocurrencies, potentially including Bitcoin, should be treated not as securities, but as commodities, and therefore regulated by the Commodity Futures Trading Commission (CFTC).
Where the SEC draws the line between crypto securities and crypto commodities, however, remains unclear, and many in the crypto community have ridiculed the SEC for abstaining from clarifying which businesses should register as securities, while continuing to sporadically prosecute certain firms for failing to do so.
