US states reach $1b crypto fraud settlement, owner promises refunds

Five US states have reached agreements with the owners and operators of an alleged $1 billion cryptocurrency investment scheme.

The scheme, spearheaded by Josip Heit and GSB Group, lured investors with the promise of tokenized fractional ownership of a skyscraper, investments in a commodity universe and a cryptocurrency allegedly convertible into gold, according to Bloomberg.

Under the terms of the settlement and the press release, Heit and GSB will agree to cease offering or selling unregistered securities in the states in which the settlement was entered into “without admitting or denying any violation of law” by GSB.

Attorneys Avi Perry and Alex Spiro, who represent Heit and GSB, announced that the states that reached the settlement will drop all previous allegations of fraud or dishonest practices as part of the agreement.

No fines will be imposed; instead, Heit and GSB have agreed to refund all eligible U.S. customers in the settlements.

“We welcome this settlement… We are committed to refunding all eligible customers throughout the claims process. Our customers always come first. Protecting the brand, our reputation and our customers is our top priority.”

Josip Heit, President of GSB Germany

Crypto scam details

The scheme, which involved hundreds of thousands of investors, collapsed after failing to raise the required $175 million through the sale of cryptocurrencies tied to the skyscraper project. Subsequent trading losses reported by GSB in October 2023 further exacerbated the situation, leading to withdrawals being restricted for many investors, according to Bloomberg.

The current settlement covers Texas, Alabama, Arizona, Arkansas and Georgia, according to the Texas securities regulator. If a customer’s state or province becomes part of the settlement, those who have invested in any of GSB’s products, from crypto tokens to educational programs, should be eligible for a refund.

The Texas State Securities and Exchange Commission, which is conducting the investigation, said the deal was designed to ensure that investors in the U.S. and Canada received the full amount they invested, excluding withdrawals.

AlixPartners LP, known for handling the claims process in the Bernie Madoff and FTX cases, will manage the refunds.