Texas has pulled out of the GSB settlement, citing multiple alleged violations of the reached agreement by GSB and owner Josip Heit.

I won’t absolve Mr. Heit of his latest frauds. The term sheet has been myriad violated by your clients, those that still exist.

Let’s litigate and see if you can look in a mirror.

Texas is done due your violations. Y’all violated the term sheet six ways to Sunday.

Nice job, and with all due respect,

Travis J. Iles
Securities Commissioner
Texas State Securities Board

The Texas State Securities Board (TSSB), details alleged GSB settlement violations in a filed First Amended Notice of Hearing.

In its March 11th notice filing, TSSB states;

Following the execution of the term sheet, the Enforcement Division began uncovering violations of the term sheet by Respondent Heit and GSB Germany, and it accused Respondent Heit and GSB Germany intentionally, willfully or knowingly withholding and/or misrepresenting information used for and relied upon in the term sheet.

“Term sheet” refers to a signed agreement that defined the terms of the GSB settlement.

The Enforcement Division began notifying Respondent Heit and GSB Germany about their failure to comply with the term sheet and affording them the opportunity to cure the violations pursuant to Paragraph 16 of the term sheet.

Although they were provided notice, Respondent Heit and GSB Germany failed to cure many of the violations of the term sheet, including key provisions that obligated Respondent Heit and GSB Germany to take steps to ensure the successful return of all deposits, less withdrawals, through the claims process.

An email exhibit filed with TSSB’s notice filing details an email exchange between Travis Iles, Texas’ Securities Commissioner, and Heit’s attorneys.

The email, from Iles to Heit’s attorneys, is dated February 19th, 2025, and reveals “new requirements” from GSB;

[TSSB] received and is responding to the email you sent on February 18, 2025.

The TSSB is also responding to respondents’ demand that the TSSB and other participating agencies endorse new requirements not contemplated by the original term sheet.

Beyond disappointed and underwhelmed, but also consider the source and their clients.

Note the February 18th email GSB’s attorneys sent TSSB is not included as an exhibit, so we can only go by what is disclosed by Iles.

One of the new demands from Heit (right) is, under threat of legal retaliation, GSB victims be barred from discussing participation in the settlement.

These new requirements, if implemented, would prevent Texans that elect to file claims from pursuing further relief even if they only recover a fraction of principal believed owed to them.

The new requirements also incorporate a nondisclosure provision that would largely bar Texans from discussing, in whole or part, the very fact that they participated in the settlement and even may subject them to liability for posting to their social media accounts or conversing with friends and family.

We understand that respondents are willing to “die on this hill” and have “drawn a line in the sand” in regard to the demand that the TSSB and participating jurisdictions must endorse or accept these new terms.

Perhaps not surprisingly, GSB’s “new requirement” was rejected by TSSB.

We simply cannot endorse or accept the new requirements.

They are unnegotiated provisions that may unduly restrict Texans from receiving full monetary relief while creating liability for Texans that would otherwise be exercising their freedom of speech preserved in Article 1, Section 8 of the Bill of Rights to the Texas Constitution and the First Amendment to the United States Constitution.

We cannot approve of a new procedure where the prospect of financial recovery is used as a carrot and the possibility of litigation acts as a stick.

As to specific violations of the term sheet, Iles writes;

When the TSSB executed the term sheet, we understood that the agency and the respondents would comply with the requirements set forth therein.

Since then, we have learned that our understanding was incorrect. Although the agency has complied with the Term Sheet, the respondents failed to comply with many of its terms.

We have provided notice about these issues, which include but are not limited to the following:

Quoting Joe Rotunda, TSSB’s Enforcement Director, Iles goes on to bring up GSB failing to preserve and provide information pertaining to Texas GSB investors.

Although we understood your clients may not have preserved all records relating to their dealings with Texans, they nevertheless committed to providing the TSSB with all available information obtained by Texans when creating accounts with respondents, as well as their physical addresses, their crypto wallet addresses and information reflecting the types and amounts of digital assets received from, distributed to, and owed to them.

This information was not provided for many Texans and no information whatsoever was provided for other Texans, even though all information appears to be currently available to your clients through affiliated sites.

Rotunda claims, as part of TSSB’s investigation into GSB, he himself signed up and invested into GSB. Iles notes discrepancies with his records and data provided to TSSB by GSB, pertaining to his investor account.

During the TSSB’s investigation of your clients, I opened an account with GSB Gold Standard Bank LTD dba GS Partners and successfully completed KYC. Beginning as early as October 2023 and continuing through December 2023, as part of my investigation, I also deposited assets into wallet address provided to me by GS Partners.

I never withdrew assets or profited from my dealings.

Nevertheless, the respondents provided the TSSB with information showing that I deposited assets valued at $203.69, withdrew assets valued at $690.69, and earned profits valued at $487.00 (more than twice my principal) and was not eligible to participate in the claims process.

This suggests investor data GSB has provided to North American regulators may be fabricated.

The information provided to the TSSB pursuant to Paragraph 6 of the Term Sheet is not simply incomplete. It is erroneous and unreliable, and the TSSB cannot use the information to ensure that Texans actually receive a return of their deposits following the conclusion of the claims process.

Rotunda argues that because GSB is providing “erroneous and unreliable” data, in violation of the Term Sheet, TSSB

is unable to contact all clients residing in Texas to notify them that they will be precluded from recovery if they do not file a timely claim during a 90-day window.

Another alleged Term Sheet violation pertains to paragraph 7;

which generally require the publication of certain information relating to the claims process on all relevant websites, metaverses or online platforms under [GSB’s] control.

Paragraph 7 also obligated respondents to develop “a list of the homepages or all websites, metaverses, or online platforms under their control or with which they are affiliated” and further obligates them to “add any additional websites, metaverses, or online platforms requested by the Working Group, if any.”

The “Working Group” refers to North American regulators who have signed on to participate in the GSB settlement.

After receiving a list of “website and platforms” from GSB, TSSB

notified respondents the list was woefully deficient and requested the addition of additional websites and platforms under the control of respondents.

The requests were rejected, and the notification was not published through the requested mediums.

GSB is also alleged to have failed to notify victims in Texas by writing.

Paragraph 9 also relates to the notification of clients, requiring respondents to “send a written communication to clients in the Settling Jurisdictions by email that clients should coordinate with the Claims Administrator to withdraw all assets from their Respondent-hosted accounts through the Claims Process.”

However, we have talked to clients that have not received the requisite notification by email. Their experience is consistent with my experience.

Despite “representations of solvency” from Heit during settlement negotiations, Rotunda cites examples of insolvency pertaining to GSB related entities.

Paragraph 17 of the Term Sheet authorizes the pursuit of any and all remedies if the TSSB discovered that respondents intentionally, willfully or knowingly withheld or misrepresented information used for and relief upon in the Term Sheet.

Since executing the Term Sheet, the TSSB independently learned and provided notice that various respondents controlled by Mr. Heit were actually dissolved before Mr. Heit executed the Term Sheet on their behalf.

In fact, GSB Money LTD (UK) was dissolved on or around July 6, 2021- more than three full years before it executed the Term Sheet and Mr. Heit represented GSB Money LTD and other respondents were “entities, brands, or platforms which were, during all or part of the time period from at least 2021 to November 16, 2023, active and controlled by Josip Heit…”

We also discovered that GSB Gold Standard Pay KB (Sweden) filed for bankruptcy a little more than two months after the execution of the Term Sheet, regardless of the representations of solvency set forth in the Term Sheet.

DAO1 and its attached “Apertum blockchain”, together making up the fifth documented GSPartners reboot, also get a mention;

We relied upon your clients’ representations that clients residing in the United States and Canada would not be able to access products through Apertum and DAO1.ai.

We have been discussing this issue you since November 2024, when the TSSB independently learned that Mr. Heit and other parties may be launching Apertum, a proprietary blockchain purportedly built as subnet of the Avalanche blockchain, and DAO1.ai, a platform that purports to use all-in-one smart wallet technology tied to payment solutions, stocks, commodities, real estate, cryptocurrencies and AI analysis.

Owing to it being a continuation of the investment fraud that started with GSPartners, DAO1 is supposed to be blocked to North American residents.

However, as you may know, I have been investigating DAO1.ai, registered an account through DAO1.ai and connected my defi wallets to the platform.

Although I did not pass KYC, earlier this month, the parties transferred tokens deployed on the Apertum blockchain to my wallet.

Yesterday, the parties launched a decentralized exchange for swapping tokens on the Apertum blockchain.

I was able to access and connect my wallet to the decentralized exchange – without using a VPN, and acting from an IPv4 address that resolved to Austin, Texas.

I was also able to interface with the DEX and swap tokens on the Apertum blockchain.

Rotunda also digs into GSB’s marketing claims pertaining to DAO1 – decentralization in particular and how that pertains to Apertum;

Although our investigation of suspected Apertum and DAO1.ai offerings in Texas is ongoing, we are highly concerned about information and evidence obtained to date.

This information shows the blockchain may not be using a proof-of-work consensus mechanism, even though certain clients appears able to [purchase] products that may pay profits tied to mining rewards.

It also appears the blockchain may use a proof-of-authority consensus mechanism – and if true, the Apertum blockchain may actually the opposite of a decentralized network – and the parties appear to be able to unilaterally burn certain tokens even when purportedly transferred to a third-party defi wallet that has not granted permissions through a smart contract interaction.

That last sentence suggests GSB and Heit can delete Apertum token balances from third-party investor wallets, with or without permission.

Iles concludes;

Given that respondents are demanding the imposition of new requirements that harm Texas, and knowing that respondents are willing to “die on this hill” and have “drawn a line in the sand,” we understand the settlement is terminated.

A hearing pertaining to TSSB’s original GSB securities fraud enforcement action is scheduled for April 14th to 17th.

At the hearing TSSB states it plans to present over “900 exhibits” and “several hundred records relating to Mr. Heit, as well as the alleged owners … such as Kristina Heit and Ulf Lammers.”

What Texas pulling out of the GSB settlement means for other “Working Group” regulators is, at this stage, uncertain.

I can’t see the settlement proceeding in good faith on fabricated investor data – but as of yet Texas is the only member of the Working Group to pull out.

I suspect if we don’t hear any updates between now and April 14th, the outcome of the TSSB hearing will play into whether other regulators in the Working Group proceed.