Investors In $1B Crypto ‘Skyscraper’ Scheme To Be Refunded In Settlement

Texas and four other states have reached a settlement with the operators of an alleged $1 billion illegal cryptocurrency investment scheme highlighted by the tokenized partial ownership of a skyscraper, according to the Texas State Securities Board.

Regulators hope to return hundreds of millions of dollars to investors in the project who lost funds. The Texas State Securities Board announced the deal with Josip Heit, the owner of GSB Group, and his companies, which sold products such as token-based ownership in a skyscraper, investments in the metaverse and a cryptocurrency they claimed could be staked for rewards. convertible into gold.

Hundreds of thousands of U.S. and Canadian investors were hurt, Joe Rotunda, director of enforcement at the Texas State Securities Board, said in an interview.

“We have negotiated an agreement that will ensure that all customers in any state or province that join the settlement receive 100 percent of their deposits, less any withdrawals,” Rotunda said. “This is really a North American settlement. We don’t often have the opportunity to get pure financial aid on a large scale. This is rare.”

Among other allegations, the project failed to raise the required $175 million by selling cryptocurrencies that represented partial ownership of a skyscraper, causing significant losses to investors who purchased and owned the underlying assets, according to the agency. And in October 2023, GSB announced trading losses and reportedly began limiting the ability of many investors to withdraw certain types of profits.

The settlement currently includes Texas, Alabama, Arizona, Arkansas and Georgia, according to the Texas securities regulator. All customers who invested in any product offered by GSB — everything from crypto tokens to an educational academy — should be able to get their money back, if their state or Canadian province joins the settlement.

State and provincial regulators began pooling their resources to investigate the scheme in October. Texas filed an enforcement action last November. It was one of many federal and state actions against crypto industry players in recent years. Many such actions resulted in only partial restitution to victims or relatively small damages payments.

The claims process will be managed by AlixPartners LP, which handled the process for clients of fraudster Bernie Madoff and conducted blockchain analysis for handling the bankruptcy of cryptocurrency exchange FTX, which imploded in 2022.

“Our goal is to identify all customers and make sure they know about this process, have the opportunity to recover their funds,” Rotunda said. “Any state that wants to join this deal can sign the deadline starting on Monday.”

Copyright 2024 Bloomberg.