Joshua David Nicholas, 28, of Stuart, Florida, along with two co-conspirators, were each charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud by a South Florida federal grand jury. Nicholas pleaded guilty to conspiracy to commit securities fraud. Nicholas and his cohorts promoted him as the “head trader” for his company. Called EmpiresX, it was also known as Empires Consulting Corp. The company was allegedly a cryptocurrency platform. Court documents indicate that Nicholas and his co-conspirators made misleading claims about the platform and his company. Their selling point was a fictitious trading bot called EXBOT that used a combination of artificial and human intelligence to maximize investor profitability. The bot allegedly offered “guaranteed” returns for investors and prospective investors, claiming daily returns of 1%.
How EmpiresX Made Money
Using social media and Zoom calls, the trio marketed EmpiresX to potential investors, with EXBOT as their unique selling proposition. The truth is:
- EmpiresX was a Ponzi scheme
- “Dividends” were paid to investors with funds from other investors
- Real-time live presentations they made on Zoom were fraudulent
- EXBOT did not exist
- During the operation of their Ponzi scheme, Nicholas hid his prior involvement with securities and presented himself as another. His partners referred to him as a “genius trader,” but he was no longer a registered broker.
- The firm was never registered with the SEC as they claimed, and had no exemption for registration
The trio bilked over $100 million from the investors and laundered funds through a foreign cryptocurrency exchange. They also misappropriated investor funds for attorney’s fees, high-end clothing, and luxury vehicles. Initially, they told investors that they could withdraw money at any time and allowed investor withdrawals. Over time, they added fees and other obstacles to discourage withdrawal after the scheme began to collapse. In October 2021, they held a meeting and claimed to have paid out $112 million to investors. They also falsely claimed that within the prior week, they made 7,000 payments totaling $12 million. One month later, they prevented investors from withdrawing funds. If convicted, Nicholas could spend five years in prison for fraud.
Nicholas’ Prior Misconduct
Nicholas began his career in 2016 as a registered broker and investment advisor with Merrill Lynch. He was terminated in 2020 for multiple violations. They include forging a client’s signature on a document and offering untrue information about his outside business activities while at the firm, where two customers lost $1 million. He was also cited for giving unsuitable investment recommendations, omissions of material facts, and engaging in “selling away,” or selling investments not vetted or authorized by the firm. The Financial Industry Regulatory Authority, or FINRA, permanently barred Nicholas from acting as a broker on 1/24/2022. Nicholas’ broker record is publicly available on FINRA’s BrokerCheck website and includes the most recent SEC case involving the Ponzi scheme. The National Futures Association, a regulatory agency for the derivatives industry, also suspended Nicholas’ membership. This included soliciting a $300,000 loan for his company, JDN Capital, using “misleading information,” and then misappropriating the funds for personal use. He solicited the loan from a client for additional investing and fabricated statements from a fictitious brokerage account. FINRA also conducted its own investigation into the JDN Capital dealings.
California Corporations Code
Fraud encompasses a range of offenses and is a white-collar crime. Securities fraud in The Golden State is covered by the California Corporations Code. This law was modeled on Section 12(a)(2) of the Securities Act of 1933, also called the “truth in securities law.” In Section 25401 of the California Corporations Code states that it’s unlawful to buy or sell a security with either incorrect information or omitting important information to intentionally mislead a person into making a purchase. Section 25540(b) states that a person who violates California’s securities law can face prison for as long as five years under Section 1170 of the Penal Code. Additionally, they can be subjected to fines of no more than $10 million, in addition to a prison sentence. Under People v. Koenig, 58 Cal. App. 5th 771 (2020), the Court established that securities fraud is a general intent crime if someone:
- Has knowledge of the false or misleading nature of representation or of the corporality of the omission, or
- Has criminal negligence in failing to acquire the knowledge
Should someone intentionally commit fraud like Nicholas, it’s a crime. But unintentional fraud can also lead to fines and prison time. Examples of unintended fraud include:
- A broker or investment advisor who makes unsuitable recommendations based on incorrect information
- An investor who unintentionally discloses “insider information”
- Sellers who omit disclosures of risk in a particular investment or security
This means that someone can be accused of (and charged with) fraud in California even if they never intended to commit fraud. Only misrepresentation or omission of material facts are required to show fraud. California’s Penal Code 532 PC also addresses _“theft by false pretenses”—_that is, defrauding someone out of money or property with false promises or representations. The fraud can be prosecuted as either a misdemeanor or a felony, depending on the circumstances.
Are You Facing A Fraud Investigation?
You need to consult with a skilled and experienced criminal defense attorney immediately. Fraud charges are serious and can lead to jail time. This can impact you, your family, your life, business, freedom and your future. Sevens Legal Criminal Lawyers provides quality legal counsel for individuals who are being investigated or charged with fraud in San Diego. The right legal counsel can make the difference between acquittal or a plea deal and a prison sentence. We will work with you on what you should and should not say during interviews and questioning to avoid self-incrimination or harm to your defense in court. It’s important that anyone under investigation for fraud understand their rights at the outset. You should also have defense counsel that’s experienced and dedicated to aggressively defending your rights. If you are facing fraud charges, Sevens Legal can provide you with a strong defense for allegations such as:
- Credit card fraud
- Identity fraud
- Insurance fraud
- Welfare fraud
As well as other types of fraud. Contact attorney Samantha Greene today at Sevens Legal Criminal Lawyers, for a free consultation. We’ll discuss your case with you and let you know your legal options. We work to get the best possible outcomes for all our defense cases.