GS Partners to Refund Crypto Investors in Full in Settlement with Five U.S. States
Date: 2024-09-11 Author: Henry Casey Categories: BUSINESS
The Texas Securities Board (TSSB) announced on Monday that Texas, Alabama, Arizona, Arkansas, and Georgia have reached a settlement with the firm and its owner, Josip Hite.
The settlement follows a multi-state investigation that found that GS Partners misled investors by making false statements about the potential profits and risks associated with crypto assets.
GS Partners to Refund 100% of Client Funds
Under the terms of the agreement, GS Partners will refund 100% of investors’ funds in exchange for the dismissal of all civil lawsuits and investigations against the company.
Notably, no monetary penalties were imposed on GS Partners or Hite.
The company also agreed to stop offering unregistered securities in the states involved.
The case began with enforcement actions filed in November 2023, when state regulators accused GS Partners of misrepresenting key information to investors.
The company sold investments in tokenized shares of a Dubai skyscraper and a virtual real estate project in the metaverse called “Lydian World,” which promised returns of up to 5% per week.
However, GS Partners failed to meet its $175 million goal, resulting in significant financial losses for investors.
In a press release, Hite expressed support for the settlement and reiterated his commitment to return all funds through the formal claims process.
He emphasized that the company’s priority is to protect its reputation and customers.
Other U.S. states could also join the agreement under similar terms, expanding the investor refund program beyond the five participating states, according to Hite’s legal team.
SEC Crypto Fines Rise
The U.S. Securities and Exchange Commission (SEC) has levied nearly $4.7 billion in fines on cryptocurrency companies and their executives in 2024, a 3,000% increase from 2023.
The jump was largely driven by a significant $4.47 billion settlement with Terraform Labs and its former CEO Do Kwon in June. The SEC called it “its largest enforcement action to date,” according to a Sept. 9 report from Social Capital Markets.
In 2024, the SEC conducted 11 enforcement actions, resulting in a 3,018% increase in fines compared to $150.3 million in 2023, despite a 19-case reduction.
The total fines, including forfeitures, recoveries, civil penalties, settlements, and accrued pre-judgment interest, were calculated from the date these actions began.
In 2019, the SEC levied a $1.24 billion fine against Telegram, including $18.5 million in civil penalties and $1.2 billion in investor refunds.
Social Capital Markets noted that this case contributed significantly to the nearly 2,000% increase in the average fine, which was over $70 million in 2019.
From 2020 to 2023, the average fine ranged from $5 million to $35.2 million, but the Terraform Labs case in 2024 increased the average fine to more than $420 million.
Other cases have seen fines of more than $100 million for companies like GTV Media Group, Ripple Labs, and scammers John and Tina Barksdale.
