The California Department of Financial Protection and
Innovation (DFPI) issued a cease and desist order against a purported
cryptocurrency investment platform for violating the state’s securities laws.
The enforcement action was part of a coordinated effort with other states’
regulators, including Texas and Alabama.
The order accuses GSB Gold Standard Bank Ltd., Swiss Valorem
Bank LTD and GSB Gold Standard Corp. AG (collectively, GSPartners), as well as GSPartners
Founder and Chairman of the Board Josip Heit, Corporate Trainer Bruce Innes
Wylde Hughes and Head of M&A Dirc Zahlmann, of offering and selling unqualified
securities and making material misrepresentations and omissions to investors
related to crypto asset investments.
“Beginning at least as early as 2023, GSPartners offered and
sold securities in the form of investment contracts in California through
general solicitations on its website. GSPartners referred to these investment
contracts as ‘certificates,’ ‘MetaCertificates,’ ‘Elemental Certificates,’ and
‘Success Certificates’ (collectively, certificates),” the order stated.
“GSPartners held itself out as an investment platform. The
purported purpose of the securities offerings was for GSPartners to use
investor funds to trade in the forex market and to invest in a diverse
collection of real-world industry sectors, including real estate, fintech,
payments systems, renewable energy, supplements, and gaming, which in turn
would generate returns for investors who purchased certificates.”
The company claimed that its “MetaCertificates” paid
investors fixed weekly returns ranging from 2.5 percent to 5 percent and that
it was partnered with a specific forex broker, according to DFPI.
“Investors were told that this broker was one of the largest
in the world, was licensed, regulated, and had a trustworthy reputation, and
that purchasing GSPartners’ certificates would give investors exclusive access
to this broker’s experience and knowledge,” the order stated “However,
GSPartners’ representations were false. In reality, no such partnership
existed, and the purported returns were not being generated by the broker
managing and trading GSPartners’ investors’ funds.”
The order also accused Heit, Hughes, and Zahlmann of making
“untrue statements of material fact and material omissions to investors and
potential investors,” including:
·
falsely representing GSPartners was partnered
with a particular forex broker to provide services to investors.
·
falsely representing GSPartners was a licensed
bank when the “license” was granted by a fictitious regulator.
·
using the terms “bank” and “banking” when
GSPartners was not licensed to engage in banking in California and that investor
funds were not FDIC-insured.
·
misrepresenting expected profits and risk of
loss.
·
failing to disclose that the sale of GSPartners’
securities was not qualified in California.