Moneyweb 28th November 2023 by Claran Ryan

GS Partners not licensed to solicit investments in SA – FSCA

This follows adverse warnings against the company and its affiliates in several US states and Canada.

The Financial Sector Conduct Authority (FSCA) has warned the public to exercise caution when dealing with GS Partners, also known as GSP or Gold Standard Partners.

This follows similar warnings against GS Partners in the US and Canada for violations of securities laws.

“GS Partners is not licensed under any financial sector law to provide financial products or financial services in South Africa. The FSCA is concerned about the unrealistic returns offered by GS Partners, and is conducting a preliminary investigation into its activities in South Africa. The FSCA has approached GS Partners for comment, and the entity has until Friday, 24 November 2023 to reply,” reads the FSCA statement.

The FSCA goes on to say that while it is not commenting on the specifics of GS Partners’s business, anyone offering financial products in SA requires authorisation from the FSCA.

Backing from sports stars

GS Partners and its affiliates have been criticised on social media for operating a multi-level marketing scheme that appeared to offer unrealistic returns while rewarding agents with generous commissions for introducing new investors.

The company extensively used sports stars, among them former Springbok hero Victor Matfield, to market its investments.

Read:
FSCA warns against dubious brokers, platforms offering easy money
FSCA cracks the enforcement whip … 1 668 times

A cease and desist order issued by the Texas State Securities Board this month highlighted this aspect of its business model: “GSP has been claiming that various athletes have also endorsed, promoted or otherwise supported the investments, the operations of GSB Group, and/or Lydian World. These athletes include boxer Floyd Mayweather and footballers Roberto Carlos, Mario Yepes, David Trezeguet, Michel Salgado, and [former SA soccer star] Lucas Radebe.”

Gold Standard Banking Corporation (GSB) is another affiliated company registered in Germany.

Defamation lawsuit

In 2021, GSB, its chair Josip Heit, and four other individuals – Tony De Gouveia, Bruce Hughes, Andrew Eaton and Brendon Earp-Jones – sued three commentators appearing on the YouTube channel G-Crypt for defamation and loss of income to the tune of R476 million after they criticised the company’s investment offering in unflattering terms. The company and the plaintiffs say they suffered substantial income losses after the videos first appeared.

The three defendants are Louis Nel, Francois Harris, and Gareth Grobler. The offending G-Crypt videos have since been removed from YouTube, though efforts are being made to reinstate them. Grobler founded the now-defunct iCE3x crypto exchange, which is currently in provisional liquidation.

Read:
Crypto exchange iCE3x suspends trading after discovering account discrepancies [Mar 2021]
Crypto exchange iCE3 to be liquidated, suspends all withdrawals [Apr 2021]
The liquidation of iCE3 is a watershed moment for SA’s crypto industry [May 2021]

The defendants opposed the GSB defamation claim and fired off a counter-suit, seeking to have it declared an illegal scheme. That legal suit has yet to be heard in court, and it is unclear what impact the latest FSCA warning will have on the outcome.

Skyscraper vouchers and the metaverse

The Texas State Securities Board says GSP recently engaged in an offering of digital assets where each digital asset represented fractional ownership of a unit in a skyscraper, known by the names “G999 Exclusive Living Business Bay” and “G999 Tower”.

It purportedly acquired the rights to resell units in the Dubai skyscraper for 12 months and issued “XLT Vouchers”, representing ownership of one square inch of the tower as a way to earn passive income. The vouchers for the first phase of the scheme went on sale for $9.63 (about R180) each, with two more phases due to come on stream at $12.52 and $15.68 each, with the purpose of raising about $175 million (about R3.2 billion) in total.

The Texas regulator took exception to GSP’s claim that it “believes there is no limit to the upside for XLT token holders …” and the fact that the tokens are highly illiquid.

The Texas regulator says the company was also involved in promoting a metaverse known as Lydian World or Lydian.World, which would allow its community members to participate in assisted copy trading (the ability to mimic expert traders), digital artwork creation and marketing, and transparent digital banking reward mechanisms, among other opportunities.

Lydian World provides over 18 million square metres of virtual land that can be acquired with LYS tokens, a digital asset issued on the Binance blockchain.

“After using LYS to purchase virtual land in Lydian World, users can then build a virtual building on the virtual land, and then open a virtual business using the virtual building as a virtual storefront, and even rent the virtual building to other users – assuming the virtual building’s design is approved by a virtual city town hall,” says the Texas cease and desist order.

Read:
Tips to avoid being scammed when investing in cryptocurrency
Virtual real estate: New-age fad or feature of the future?

LYS token owners can purportedly earn annual returns of 14.8% in the first year by “staking” (investing) the tokens. Additional benefits accrue to members who purchase what are known as Elemental MetaCertificates and Success Series Certificates.

“Respondent GSP frequently incentivizes the loading of additional principal through various promotions. These promotions may increase the value of a certificate or unlock weekly or monthly income streams,” says the Texas regulator.

The FSCA notice provides links to warnings issued against GSB by regulators in Texas, Washington, California and Wisconsin, as well as the Canadian provinces of British Columbia, Alberta, Saskatchewan and Canada’s Autorité Des Marchés Financiers. Cease and desist orders were also issued in recent weeks against GSB and its affiliates, including Swiss Valorem Bank and Josip Heit, by the US states of New Hampshire, Arizona and Florida.