Securities regulators in Texas and Alabama have accused a group of companies tied to a reverse real estate project of fraudulently bilking millions from investors.
The Texas State Securities Board last week issued an emergency injunction against GS Partners, Swiss Valorem Bank and several related entities controlled by Josip Heit.
The Alabama Securities Commission has also filed its own cease and desist order against Heit and GS Partners for illegally selling securities in the form of ‘MetaCertificates’.
Regulators in both states allege that the companies ran illegal securities schemes that linked digital assets to virtual real estate in a metaverse project called Lydian World.
According to the orders, GS Partners sold blockchain-based tokens representing fractional ownership in a 36-story virtual skyscraper called G999 Tower, located in the metaverse. The company claimed it had acquired rights to resell units in the skyscraper and promised investors returns from lease revenue.
According to the Texas order, GS Partners raised an undisclosed amount by selling the tokens in 2021 and 2022, but failed to raise a targeted $175 million.
The Alabama order accuses the company of guaranteeing unrealistic returns of up to 5% per week to investors in that state who purchased MetaCertificates.
According to the Alabama regulator, GS Partners markets the MetaCertificates in the state through WealthBuilders Worldwide. Customers purchase the MetaCertificates by paying a fixed amount each month and can achieve additional returns by recruiting new customers.
A representative of GS Partners told investors in Alabama that the MetaCertificates were “the same as a bank certificate of deposit, only better” and claimed that a $5,000 investment could return more than $60,000 in 18 months, according to the order.
Regulators say many investors have likely lost most of their investment in the Metaverse real estate program and MetaCertificates.
Additionally, both states claim that GS Partners and Swiss Valorem Bank sold fraudulent certificates related to cryptocurrencies. According to the Texas Order, the companies used misleading sales materials touting high returns in U.S. dollars, while actually paying out profits in obscure internal tokens.
The companies are controlled by Josip Heit, a German businessman previously suspected of running illegal cryptocurrency schemes. The companies are not registered to sell securities in Texas or Alabama.
Regulators have ordered the companies to immediately cease all offers and sales of illegal securities. The emergency measures will remain in effect for up to 31 days in Texas and 60 days in Alabama before they must be challenged at a hearing or become permanent.