Investors Saved In $1 Billion US Crypto Scheme Through Multi-State Settlement

In a significant development, Texas and four other states have reached a pivotal settlement with the operators of an alleged $1 billion illicit crypto investment scheme. 

According to Bloomberg, the Texas State Securities Board revealed details of this settlement, highlighting a venture that involved tokenized partial ownership of a skyscraper, among other investment avenues.

In this case, the regulators are reportedly seeking to recoup the financial losses suffered by numerous investors who participated in the project. 

Regulators Seek Full Reimbursement For Crypto Investors

The settlement announced with Josip Heit, the owner of the GSB Group, and his associated companies covers a range of products, including token-based ownership of a high-rise building, investments in the metaverse, and a cryptocurrency that purportedly could be staked for rewards convertible into gold.

Joe Rotunda, the enforcement director at the Texas State Securities Board, emphasized the scope of the impact, noting that “hundreds of thousands” of investors in the United States and Canada bore the brunt of this ordeal. 

The negotiated settlement ensures that all clients who opt to join receive full reimbursement of their deposits, minus any withdrawals.

Among the allegations against the project is the failure to raise the requisite $175 million through the sale of crypto assets representing fractional ownership of a skyscraper, leading to substantial losses for investors holding these assets. 

Additionally, GSB’s announcement of losses linked to trading and purported restrictions on investors’ ability to withdraw certain profits in October 2023 further compounded the situation.

Settlement Process To Begin Soon

The settlement, including Texas, Alabama, Arizona, Arkansas, and Georgia, encompasses clients who invested in any of GSB’s offerings, from cryptocurrency tokens to educational programs. 

Per the report, state and provincial regulators initiated a collaborative investigation into the scheme in October 2023, culminating in Texas filing an enforcement action the following November.

AlixPartners LP, entrusted with administering the claims process, has a track record managing similar endeavors, having overseen compensation for Bernie Madoff’s clients and conducted blockchain analysis for the bankruptcy proceedings of the defunct crypto exchange FTX in 2022.

Joe Rotunda reiterated the primary objective of the claims process—to reach all affected clients and facilitate their participation in retrieving their funds. The door remains open for any state or Canadian province interested in joining the settlement, with the official process set to commence shortly with no clear date provided.

At the time of writing, the total crypto market capitalization stands at $1.95 trillion after dropping to $1.81 trillion at the end of last week. Similarly, the largest cryptocurrency on the market, Bitcoin (BTC), regained the $56,000 mark on Monday, recording a price recovery of nearly 5% in the last 24 hours.

Featured image from DALL-E, chart from TradingView.com