UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Joshua David Nicholas ("Nicholas" or "Respondent"). The Commission finds that on April 19, 2023, a final judgment was entered by consent against Nicholas, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Empires Consulting Corp., et al., 1:22-cv-21995-CMA, in the United States District Court for the Southern District of Florida. The Commission's complaint alleged that Nicholas and others fraudulently raised at least $40 million of investor funds in EmpiresX investments by falsely claiming that EmpiresX could earn an expected investment return through a proprietary trading "bot" or by manual trading performed by Nicholas. In reality, the bot was fake, Nicholas and others traded only a fraction of the funds they took from investors, and that limited trading failed to earn the purported return. Nicholas and others further lied to investors to provide assurances of the safety of their investment, including by falsely telling investors that EmpiresX had filed SEC registration paperwork. Instead, Nicholas and others misappropriated that investor money for personal uses such as cars, real estate, and travel. The complaint also alleged that Nicholas and others sold unregistered securities. On September 8, 2022, Nicholas pled guilty to one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5, before the United States District Court for the Southern District of Florida, in United States v. Joshua David Nicholas, 1:22-cr-20296-JEM. In connection with that plea, Respondent admitted that he conspired with others to commit securities fraud by offering EmpiresX investments through devices, schemes, and artifices to defraud, and materially false statements and omissions. Specifically, Respondent admitted that the purported EmpiresX bot was not real, and that EmpiresX was instead a Ponzi scheme that paid earlier investors with money obtained from later investors. Respondent further admitted that in marketing EmpiresX investments, he misrepresented himself as another individual in order to conceal from investors and potential investors his prior disciplinary history.

Order

Bar (Permanent)

association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

4/24/2023

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (the "Commission"), for its Complaint against defendants Emerson Sousa Pires and Flavio Mendes Goncalves, their company, Defendant Empires Consulting Corp. ("EmpiresX"), and EmpiresX's head trader, Defendant Joshua David Nicholas (collectively, "Defendants"), alleges that this case stems from an illegal offering fraud scheme. Defendants lured investors with claims of "exponential" profits, expected investment returns of 1% per day, and the prospect of making millions of dollars "in a matter of months." Defendants told investors that EmpiresX would generate these outsized returns either through a proprietary trading "bot" or by manual trading performed by Nicholas. But these statements were lies. In reality, the bot was fake, Defendants traded only a fraction of the funds they took from investors, and that limited trading failed to earn anywhere near the expected returns Defendants touted to investors. Instead, Defendants misappropriated large sums of investors' money for personal uses such as luxury cars, real estate, and travel. Beyond their untrue claims of 1% daily profits earned by bot or manual trading, Defendants further lied to investors to give them assurances of the "transparency and safety" of their investments, even during market downturns. To that end, Defendants falsely told investors that EmpiresX had filed paperwork with the SEC to register as a hedge fund, and directed investors to the filings of an unaffiliated hedge fund with a name similar to EmpiresX that actually had registered with the SEC. Similarly, Defendants touted Nicholas as a licensed trader and deceptively showed investors the credentials of a different trader with a similar name to Nicholas, while concealing that Nicholas had been suspended from trading for misappropriating customer funds. As their scheme began to collapse, Defendants broke earlier promises that investors could easily withdraw their money and later assurances of repayment. Instead, Defendants refused to honor investor requests to withdraw their funds and gave phony excuses why the investors could not be repaid. After learning of the SEC's investigation, Pires and Goncalves began winding down EmpiresX's United States operations and, in an effort to escape liability, relocated to Brazil. They left investors with heavy losses. In addition to being fraudulent, Defendants' offers and sales of EmpiresX securities violated the registration provisions of the federal securities laws. The SEC brings this lawsuit to hold Defendants responsible for their fraud, prevent them from harming future investors, and return money to Defendants' victims. By reason of the foregoing, Defendants violated and, unless enjoined, are reasonably likely to continue to violate Sections 5(a) and 5(c) of the Securities Act, violated Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act, violated Section 10(b) of the Exchange Act and Rules 10b-5(a), 10b-5(b) and 10b-5(c) thereunder.

Judgment Rendered

Disgorgement

$289,000.00

Monetary Penalty other than Fines

Injunction

undertakings

FINRA

Without admitting or denying the findings, Nicholas consented to the sanction and to the entry of findings that he converted customer funds. The findings stated that Nicholas engaged in futures contracts through an outside business activity (OBA). Two of Nicholas’s OBA customers lost more than $1 million as a result of his futures trading. In a purported effort to recoup some of their losses, Nicholas convinced the customers to invest $300,000 in a promissory note with his OBA so that entity could invest the additional funds in securities on their behalf. However, Nicholas transferred $280,000 from his company’s bank account to his personal bank account and spent approximately $58,000 of these funds on personal expenses. The findings also stated that Nicholas provided the customers with a fictitious brokerage statement containing material misrepresentations. After executing the promissory note, Nicholas’s customers repeatedly asked him to provide a copy of the company’s account statement to show them whether and how the proceeds of the note had been invested. In response to these requests, Nicholas prepared and emailed a copy of a brokerage statement purporting to show that his company had opened a brokerage account at a FINRA member firm, and that the account owned a number of securities to secure the note. The brokerage statement stated, among other items, that the account was in the name of Nicholas’s company, that the account held shares of certain equity securities, and that the account had earned approximately $72,000 in dividend income that month. In fact, Nicholas had fabricated the document. Neither Nicholas’s company nor he had an account at the firm, and neither his company nor he owned any assets custodied at the firm. The claims in the fabricated statement were therefore false. The findings also included that Nicholas engaged in an undisclosed business activity. Nicholas failed to provide written notice to his member firm that he was engaged in an OBA involving the corporate entity he formed and through which he traded futures contracts. Nicholas did not receive approval from the firm to engage in his OBA. Moreover, Nicholas falsely attested in a firm annual compliance certification that he did not engage in any OBAs. FINRA found that Nicholas engaged in an undisclosed private securities transaction. The promissory note that Nicholas solicited his OBA customers to invest $300,000 in was a security and Nicholas participated in this private securities transaction away from the firm. Nicholas failed to either provide prior written notice to the firm or receive prior written permission from the firm prior to engaging in the transaction.

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

All Capacities

Indefinite

1/24/2022

National Futures Association

The Business Conduct Committee of the NFA issued a Complaint against JDN Capital, LLC (JDN Capital) and Joshua David Nicholas (Nicholas). The NFA's complaint alleges that, on September 11, 2020, NFA's Executive Committee issued a Member Responsibility Action (MRA) against JDN Capital, LLC, and Associate Responsibility Action (ARA) against Joshua David Nicholas. The action resulted from JDN Capital and Nicholas having failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involved a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital's name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member futures commission merchant ("FCM A") and is using those funds to conduct futures and other trading. Therefore, NFA requested JDN Capital and Nicholas produce bank records and other information so NFA could determine, among other things, what JDN Capital and Nicholas did with the loan proceeds, including whether Nicholas misappropriated the money to fund his personal trading account, contrary to the terms of the promissory note. NFA was also unable to determine whether JDN Capital and Nicholas entered into other loans and, if so, the loan amounts and what JDN Capital and Nicholas did with the proceeds. On November 9, 2020, approximately two months after the issuance of the MRA/ARA, Nicholas offered to repay the loan to Mrs. Doe's Family Trust using money from his personal trading account at FCM A, in exchange for having the restrictions imposed under the MRA/ARA terminated. Accordingly, on November 16, 2020, NFA issued a "Notice and Order Terminating Member Responsibility Action and Associate Responsibility Action under NFA Compliance Rule 3-15" (Notice and Order) because, among other reasons, Nicholas had repaid the $300,000 loan to the Does and NFA had obtained information that it sought during the investigation, though not from JDN Capital and Nicholas. The Complaint charges JDN Capital and Nicholas for failing to cooperate in NFA's investigation by refusing to produce their bank records and other documents and information that NFA had requested from them in order to determine, among other things, what JDN Capital and Nicholas did with the proceeds of the loan from Mrs. Doe's Family Trust. Although Nicholas eventually provided NFA with a copy of the promissory note, he waited until after the MRA/ARA was issued to do so. Further, the copy of the promissory note that Nicholas submitted to NFA was heavily redacted to obscure its material terms. Nicholas also failed to cooperate with the terms of the MRA/ARA by violating the MRA/ARA's trading restriction. The MRA/ARA limited JDN Capital and Nicholas's trading to liquidating existing positions only. However, NFA learned from FCM A that Nicholas had engaged in a significant amount of trading in his personal account on September 14, 2020, after the MRA/ARA was issued. Nicholas also willfully provided false and misleading information to NFA regarding, for example, the trading and funding of his personal account at FCM A and his employment status with the FINRA member firm. The Complaint also charges JDN Capital and Nicholas with failing to observe high standards of commercial honor and just and equitable principles of trade.

Decision

Civil and Administrative Penalty(ies)/Fine(s)

$125,000.00

Shall not reapply for NFA membership or reapply for NFA associate membership; shall not act or become a principal of an NFA member

National Futures Association

National Futures Association (NFA) hereby gives notice to JDN Capital, LLC, a registered commodity trading advisor (CTA) Member of NFA, and Joshua David Nicholas, the sole associated person (AP) and the principal of JDN Capital and an NFA Associate that, pursuant to NFA Compliance Rule 3-15, the President of NFA, with the concurrence of NFA's Executive Committee, has taken a Member Responsibility Action (MRA) against JDN Capital and an Associate Responsibility Action (ARA) against Nicholas. JDN Capital and Nicholas have failed to cooperate with NFA by not producing documents and information that NFA has requested during its investigation of them. The investigation involves a $300,000 loan that JDN Capital and Nicholas solicited, using misleading information, around May 2020 from their former managed account customers to purchase securities in JDN Capital's name, in exchange for a promissory note that guaranteed 17% annual interest. However, around the time of the loan, Nicholas deposited $225,000 into a personal trading account at a NFA Member FCM and is using those funds to conduct futures and other trading. Therefore, NFA requested JDN Capital and Nicholas produce bank records and other information so NFA could determine, among other things, what JDN Capital and Nicholas did with the loan proceeds, including whether Nicholas misappropriated the money to fund his personal trading account, contrary to the terms of the promissory note. The NFA also alleges that Nicholas provided false and misleading information to NFA during the investigation. NFA is also unable to determine whether JDN Capital and Nicholas entered into other loans and, if so, the loan amounts and what JDN Capital and Nicholas did with the proceeds.

Associate Responsibility Action

Suspension

from NFA membership and associate membership

n/a

9/11/2020

11/16/2020

The Trustees allege unsuitable investment recommendations, selling away and omission of material facts in February 2020.

$275,000.00

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Voluntary Resignation

Conduct involving forgery of a client document.