GS Partners Settles Five-State US Lawsuit Over Crypto Investment Schemes

Five U.S. states have reached a settlement with GS Partners, the European firm behind multiple cryptocurrency investment schemes, including tokenized investments in a Dubai skyscraper.

The Texas State Securities Board (TSSB) announced on Monday that Texas, Alabama, Arizona, Arkansas, and Georgia have settled with GS Partners’ owner, Josip Heit, and his companies. The settlement ensures that investors will receive 100% of their money back.

The settlement comes after a multi-jurisdictional investigation that began in November 2023. Regulators accused GS Partners of defrauding investors through various crypto investments by misrepresenting potential profits and downplaying risks. As part of the agreement, GS Partners will refund all investments made by clients in the settling states. In return, all civil claims against Heit and his companies will be dropped, and no monetary penalties will be imposed.

The now-defunct GS Partners operated as a multi-level marketing scheme that used a network of promoters and celebrities, including former boxer Floyd Mayweather, to attract investors. The company offered a range of crypto-related investments, such as plots of virtual land in the “Lydian World” metaverse, a gold-backed cryptocurrency token, and vouchers for tokenized shares in a skyscraper in Dubai.

These vouchers, described as representing “one square inch of the 36-floor tower,” were marketed to investors as an opportunity to earn passive income from leasing units in the building. However, when GS Partners failed to reach its sales goal of $175 million, the value of the vouchers dropped to nearly zero. This led to “significant losses” for investors.

Joe Rotunda, enforcement director at the TSSB, emphasized the priority of getting customers their money back. “It is highly unusual to be able not just to provide material financial relief, but to provide 100% financial relief,” he said.

He explained that the decision to waive civil penalties was a strategic choice to prioritize investor recovery. “The idea of taking their assets and sending them to the state as a monetary penalty really just makes my stomach turn… So we were happy to waive the allegations of fraud if that meant the opportunity to get back 100% of client deposits,” added Rotunda.

The refund process will be managed by AlixPartners LP, and Heit and his companies will cover the associated fees. Rotunda mentioned that the process is expected to start in October and run for 90 days.

“In Texas, [even] if we really pushed for this case to be accelerated on the dockets in our legal system, we probably wouldn’t even get to the point where we’re presenting evidence in court by the time the clients would have received a return of assets,” he noted.

In a press release issued by his lawyers at Quinn Emanuel, Heit welcomed the settlement.

“We are committed to refunding all eligible customers through the claims process. Our customers always come first. Protecting the brand, our reputation, and our customers is our top priority,” stated Heit.

His legal representatives also said that other states could still join the settlement under similar terms. The settlement does not prevent non-participating states or federal regulators from pursuing further investigations against Heit and his companies.

Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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