EmpiresX Head Trader Pleads Guilty to $100M Cryptocurrency Investment Fraud Scheme

EmpiresX Head Trader Pleads Guilty to $100M Cryptocurrency Investment Fraud Scheme

On September 8, 2022, the “Head Trader” for EmpiresX, a purported cryptocurrency platform, pled guilty to one count of conspiracy to commit securities fraud in connection with a global cryptocurrency investment fraud scheme that defrauded victims of approximately $100 million.

According to court documents, the defendant admitted that he and his co-conspirators made numerous misrepresentations to investors to promote EmpiresX, including false statements about a purported proprietary trading bot that used artificial and human intelligence to maximize profitability, and “guaranteed” returns to investors. However, the defendant and his co-conspirators merely operated a Ponzi scheme in which they paid earlier EmpiresX investors with money obtained from later investors. Nor did EmpireX register its investment program with the US Securities and Exchange Commission, despite representations to the contrary, and it did not have a valid exemption from the registration requirement.

The defendant has not yet been sentenced, but will face a maximum penalty of five years in prison for the conspiracy to commit securities fraud charge to which he pled guilty. 

Read the press release here.

Former Engineering Executive Sentenced for North Carolina Department of Transportation Bid-Rigging and Fraud Schemes 

A former executive of Contech Engineered Solutions LLC (Contech) was sentenced to 18 months in prison for his role in bid-rigging and fraud schemes targeting the North Carolina Department of Transportation (NCDOT). The sentence follows a week-long jury trial in the US District Court for the Eastern District of North Carolina that resulted in convictions of conspiracy to rig bids, conspiracy to commit mail and wire fraud, three counts of mail fraud, and one count of wire fraud. 

The jury found that, between 2009 and 2018, the defendant participated in conspiracies to rig bids and submit false certifications of non-collusion for more than 300 projects funded by the NCDOT. The jury also saw evidence showing that the defendant directed a co-conspirator to submit non-competitive bids to NCDOT and conceal it by changing the amount of the inflated bids. The defendant also allegedly indicated to a co-conspirator that he would delete text messages he received about the conspiracy in order to avoid detection.

In addition to his prison sentence, the defendant was ordered to pay a $111,000 criminal fine and a $600 special assessment. Contech pled guilty to one count of bid rigging under Section 1 of the Sherman Antitrust Act and one count of conspiracy to commit mail and wire fraud. Contech also agreed to pay a criminal fine of $7 million and restitution to NCDOT of $1,533,988.

Read the press release here.

Elizabeth Holmes’ Third Request for a New Trial Targets E-mails From Sunny Balwani’s Trial

Former Theranos CEO Elizabeth Holmes, who is awaiting sentencing on convictions of investor fraud and conspiracy, filed a third request for a new trial based on alleged new evidence uncovered during co-defendant Sunny Balwani’s criminal trial.

Holmes’ motion alleged that the government produced e-mails concerning the role of three prosecutors in the loss of Theranos’ laboratory information system (LIS) database, including that prosecutors discussed options for preserving the LIS and chose to pursue only some of those options. According to Holmes, the LIS would have been preserved had the prosecutors gone with a different approach. Holmes further alleged that she had sought these documents since November 2020, but the government failed to produce them because they are favorable to her. She argued that prosecutors failed to take steps recommended by experts for database collection and preservation and concealed that failure from Holmes’ attorneys.

The motion stated that “the evidence contained in the LIS would have been central to any full and fair assessment of the government’s accuracy-and-reliability allegations, as well as Ms. Holmes’ ability to confront witnesses and evidence against her (and thereby present a complete defense), and would have informed Ms. Holmes’ trial strategy.” The request for a new trial asserts that these e-mails raise “new issues and cast the motion practice in a different light,” and that “[t]here is a reasonable probability that this admissible evidence … would have resulted in Ms. Holmes’ acquittal.” Notably, Holmes stated that she repeatedly asked the government for information on the loss of the LIS database but prosecutors refused to produce it, and the court also denied her request to compel the government to produce the sought-after information because of the government’s actions with respect to the database were “not relevant.” Balwani made a similar request for the documents in connection with his criminal trial, but the court ordered disclosure there because he had “articulated a specific defense” regarding the thoroughness or quality of the government’s investigation.

Holmes’ two prior requests for a new trial focused on a prosecutor witness who later attempted to contact her to express regrets about testifying against her, and an alleged “new narrative” that prosecutors employed in Balwani’s trial, respectively. The court will hear argument on the motions on October 3, 2022.

The case is US v. Elizabeth Holmes et al., case number 5:18-cr-00258, in the US District Court for the Northern District of California.

Read Law360’s coverage here.