Securities regulators in Texas and Alabama have accused a group of companies tied to a metaverse real estate project of fraudulently raising millions from investors.

The Texas State Securities Board last week issued an emergency cease and desist order against GS Partners, Swiss Valorem Bank, and several related entities controlled by Josip Heit.

The Alabama Securities Commission has also filed its own cease and desist order targeting Heit and GS Partners for illegally selling securities in the form of “MetaCertificates.”

Regulators in both states allege the companies operated illegal securities schemes involving digital assets tied to virtual real estate in a metaverse project called Lydian World.

According to the orders, GS Partners sold blockchain-based tokens that represented fractional ownership in a virtual 36-story skyscraper called G999 Tower located in the metaverse. The company claimed it had acquired rights to resell units in the skyscraper and promised investors returns from leasing income.

The Texas order says GS Partners raised an unknown amount selling the tokens during 2021 and 2022 but failed to raise a targeted $175 million.

The Alabama order accuses the company of guaranteeing unrealistic returns of up to 5% per week to investors in that state who purchased MetaCertificates.

According to the Alabama regulator, GS Partners markets and sells the MetaCertificates in the state through WealthBuilders Worldwide. Customers purchase the MetaCertificates by paying a fixed amount each month and can earn additional returns by recruiting new customers.

A GS Partners representative told Alabama investors the MetaCertificates were “the same as a bank certificate of deposit but better” and claimed a $5,000 investment could earn over $60,000 in 18 months, the order states.

Regulators say many investors have likely lost most of their investment in the metaverse real estate scheme and MetaCertificates.

In addition, both states allege GS Partners and Swiss Valorem Bank sold fraudulent certificates tied to cryptocurrencies. The Texas order says the companies used misleading sales materials touting high returns in U.S. dollars when profits were actually paid in obscure internal tokens.

The companies are controlled by Josip Heit, a German businessman previously suspected of running illegal cryptocurrency schemes. The firms are not registered to sell securities in Texas or Alabama.

Regulators ordered the companies to cease all offerings and sales of illegal securities immediately. The emergency actions remain in place for up to 31 days in Texas and 60 days in Alabama before they must be challenged at a hearing or become permanent.