Florida Man Pleads Guilty to Stealing $100 Million in Crypto Ponzi Scheme

A Florida man pleaded guilty Thursday in federal district court to participating in a cryptocurrency-based Ponzi scheme that defrauded investors of approximately $100 million, the Department of Justice announced today. Justice.

The Department said 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 capabilities of a state-of-the-art “trading bot” and Nicholas’ acumen of manual trading.

In reality, the bot did not exist.

Nicholas, along with EmpiresX co-founders Emerson Sousa Pires and Flavio Mendes Goncalves, took the majority of investor funds and leased a Lamborghini, purchased numerous items from Tiffany & Co., and made payments for a second home .

According to the Department of Justice, the small amount of user funds that Nicholas traded on the cryptocurrency market resulted in substantial losses.

Nicholas pleaded guilty today to one count of conspiracy to commit securities fraud and faces up to five years in federal prison. Nicholas was also initially 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 Brazil after freezing investor withdrawals earlier this year. However, they were both 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,” said George L. Piro, special agent in charge of the FBI in Miami. “Unscrupulous scammers are nothing new to the investment world – what is changing is that they are now pushing their criminal activity into the cryptocurrency space.”

“This case should serve as a warning to anyone who seeks to illegally capitalize on the perceived ambiguity of the crypto market to take advantage of innocent investors,” added Anthony Salisbury, Special Agent in Charge of Homeland Security Investigations in Miami.

Along with the DOJ’s criminal charges, the SEC filed a civil lawsuit in June against Nicholas, Pires and Goncalves. He alleged that the defendants violated both the Securities Act of 1933 and the Securities Exchange Act of 1934, in part for defrauding clients, but also for failing to register EmpiresX as security.

The question of which cryptocurrency-affiliated companies the US government considers securities, and therefore in violation of federal law if they are not registered as such, currently hovers over the entire crypto space, not just Ponzi schemes.

Just today, SEC Chairman Gary Gensler expressed 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).

However, where the SEC draws the line between crypto securities and crypto products remains unclear, and many members of the crypto community ridiculed the SEC for refraining from specifying which companies must register as securities, while continuing to sporadically suing certain companies for failing to do so.