A US federal court ruled against the Brazilian founders of EmpiresX, a cryptocurrency investment platform deemed illegal, imposing over $130 million in penalties and restitution, CoinTelegraph reported.

The Commodity Futures Trading Commission (CFTC) publicized the court's decision, which included permanent injunctions, financial penalties, and other legal actions against Emerson (NYSE: EMR ) Pires and Flavio Goncalves, as well as their associate Joshua Nicholas.

The case against Empires Consulting Corp, which operates EmpiresX, was initially filed on June 30, 2022, and culminated in a default judgment when the defendants did not respond to the charges by the set deadline. EmpiresX was found to have operated a fraudulent scheme, falsely promising high returns to investors and acquiring at least $40 million through deceptive crypto advertisements.

The court documents revealed that instead of investing the funds as promised, the founders misused them to purchase cryptocurrencies like Bitcoin , Ether , and USDt. They also restricted withdrawals and displayed fake profits from non-existent investments. The scheme funded personal extravagances, including luxury items and travel, but investigators managed to recover approximately $22.8 million in digital currencies.

The EmpiresX executives were found guilty of numerous violations, including fraudulent misrepresentation, failure to register with the CFTC, misappropriation of funds, and violating trading and regulations. While Nicholas has been arrested and pleaded guilty to conspiracy to commit securities fraud on September 8, 2022, Pires and Goncalves reportedly fled to Brazil upon learning of the charges.

The US Department of Justice designated the founders as fugitives in July 2022, but their extradition from Brazil remains unlikely due to legal protections for Brazilian nationals.

The financial repercussions for the founders were severe, with joint fines of $32.1 million for disgorgement and $96.5 million as a civil monetary penalty. Nicholas faced separate fines totaling $1.15 million for his part in the offenses. Beyond the financial penalties, the court also banned the defendants from trading in US financial markets.

In light of the ruling, on February 5, CFTC acting chair Caroline Pham announced a shift away from the previous administration's practice of regulation by enforcement. Enforcement director Brian Young indicated that a realignment of the task force would contribute to maintaining public trust in the integrity of US markets.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.