Investors in $1 Billion Crypto ‘Skyscraper’ Scheme to Get Repaid in Settlement

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

The regulators are hoping to return hundreds of millions of dollars to investors in the project who lost funds. The Texas State Securities Board announced the settlement 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 that they claimed could be staked for rewards convertible into gold.

Hundreds of thousands of investors in the US and Canada got hurt, Joe Rotunda, enforcement director at the Texas State Securities Board, said in an interview.

“We have negotiated a settlement that will ensure that all clients in any state or province that join the settlement receive 100% 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 relief on a broad scale. This is rare.”

Among other allegations, the project failed to raise the necessary $175 million through the sale of cryptocurrencies that represented partial ownership of a skyscraper, causing significant losses for investors who purchased and held the underlying assets, according to the agency. And in October 2023, GSB announced losses tied to trading and allegedly started limiting many investors’ ability to withdraw certain types of profits.

The settlement currently includes Texas, Alabama, Arizona, Arkansas and Georgia, according to the Texas securities regulator. All clients who invested in any product GSB offered — 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 have only resulted in partial restitution for victims, or relatively small payments for damages.

The claims process will be administered by AlixPartners LP, which managed the process for clients of fraudster Bernie Madoff and performed blockchain analysis for the bankruptcy management of crypto exchange FTX, which imploded in 2022.

“Our goal is to identify all of the clients and make sure they know about this process, they have the opportunity to get their funds back,” Rotunda said. “Any state that wants to join into this deal can sign the term sheet starting on Monday.”