SEC secures judgments against operators of EmpiresX

The Securities and Exchange Commission (SEC) has obtained final judgments against Empires Consulting Corp. (EmpiresX), and its founders Emerson Sousa Pires and Flavio Mendes Goncalves, whom the agency charged with a fake trading scheme.

According to the SEC’s complaint, filed in June 2022, Pires and Goncalves operated a purported hedge fund known as EmpiresX. Since at least late 2020, EmpiresX sold investments touting daily profits of one percent earned by a trading “bot” or by manual trading. The complaint alleges that, in reality, the bot was fake, the manual trading resulted in significant losses, and the defendants only transferred a small portion of investors’ funds to EmpiresX’s brokerage account.

Instead, the defendants allegedly misappropriated large sums of investors’ money to lease a Lamborghini, shop at Tiffany & Co., make a payment on a second home, and make other personal expenditures.

The judgment against Pires and Goncalves, entered on the basis of default by the U.S. District Court for the Southern District of Florida, permanently enjoins Pires and Goncalves from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also permanently enjoins them from, directly or indirectly, soliciting any new investors or accepting additional funds from existing investors, and issuing, purchasing, offering, or selling any security; provided, however, that such injunction shall not prevent them from purchasing or selling securities for their own personal accounts.

In addition, Pires and Goncalves are barred from acting as officers or directors of a public company. The judgment orders Pires and Goncalves to pay, jointly and severally, disgorgement of $32,179,070, plus prejudgment interest of $2,661,610. The judgment also imposes civil penalties of $6,000,000 on Pires and $5,000,000 on Goncalves.

Separately, EmpiresX consented to a final judgment, which was entered on May 22, 2023. The judgment orders similar injunctive relief, and orders EmpiresX to pay, jointly and severally with Pires and Goncalves, disgorgement of $32,178,397, plus prejudgment interest of $2,661,554, with its obligation to pay deemed satisfied by the amounts collected by a state-court-appointed receiver.