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

Five U.S. states have settled with the owner and operators of an alleged $1 Billion cryptocurrency investment scheme.  

The scheme, spearheaded by Josip Heit and his GSB Group, lured investors with promises of tokenized partial ownership in a skyscraper, investments in the metaverse, and a cryptocurrency purportedly convertible into gold, according to Bloomberg

Under the terms of the settlement and per a press release, Heit and GSB will agree to cease and desist from offering or selling unregistered securities in the settling states without “admitting or denying any violations of law” by GSB.

Avi Perry and Alex Spiro, attorneys representing Heit and GSB, announced that the settling states will withdraw all prior allegations of fraud or dishonest practices as part of the settlement.

No monetary penalties will be imposed — instead, Heit and the GSB companies have agreed to reimburse all eligible U.S. customers in the settling states. 

“We welcome this 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.”

Josip Heit, Chairman of GSB Germany

Crypto fraud details

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

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

The Texas State Securities Board, which led the investigation, announced that the settlement is designed to ensure that investors in the U.S. and Canada receive 100% of their deposits, minus any withdrawals. 

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