Patrick McMullan/Getty Photographs; Marianne Ayala/Insider
- Actual-estate govt Kent Swig unveiled a brand new cryptocurrency known as digau final month.
- One of many events concerned within the creation of the coin is Apache Mill Tailings.
- Nevada authorities have alleged it tried to promote securities illegally to fund a purported COVID-19 remedy.
- See more stories on Insider’s business page.
Kent Swig is a as soon as distinguished New York Metropolis real-estate govt attempting to reinvent his profession after a monetary meltdown a decade in the past.
Gary Wayne Walters is a felon with a number of prison convictions who’s concerned in a Nevada firm that regulators in that state say tried to illegally increase cash for an unproven COVID-19 remedy final yr.
The unlikely connection between the 2? A brand new cryptocurrency known as digau that Swig and his companions say shall be distinctive from different digital tokens in that will probably be tied to precise gold extracted from mines in California, Nevada, and Arizona.
Swig, the 60-year-old inheritor to a household real-estate fortune and cochairman of the corporate that controls the high-end nationwide residential-brokerage agency Brown Harris Stevens, announced digau last month with some fanfare.
The enterprise to create the brand new cryptocurrency would appear tailored for crazes within the funding market. Curiosity in cryptocurrency has surged in current months because of boosterism from enterprise leaders like Tesla founder Elon Musk, and as soon as obscure tokens like dogecoin have soared in worth. The value of gold, in the meantime, has steadily risen amid inflation issues.
However the digau coin providing has raised alarm amongst specialists within the companies of gold extraction and cryptocurrency. These observers don’t see the coin because the novel digital foreign money its backers tout however a car to faucet into investor hysteria for cryptocurrency, whereas elevating billions of {dollars} for what’s, as an alternative, a extremely speculative mining enterprise.
In a improvement which will give some potential buyers a cause for pause, Insider has uncovered that certainly one of Swig’s key companions within the new token is the mining agency Apache Mill Tailings.
The corporate was warned final yr by the Nevada secretary of state’s workplace to desert an effort to lift cash for a purported COVID-19 remedy because the pandemic started spreading within the US. Apache, Insider discovered, seems to have shut ties to Walters and one other man, Ross Huebner, who each have prison histories, together with convictions for monetary crimes.
A questionable companion
However Swig stays unbowed and stated he deliberate to start promoting the digau coin by the tip of the yr.
Earlier this month, Dignity Gold, an organization that may oversee the digau coin providing and is managed by Swig and one other govt, Stephen Braverman, introduced that it had minted 3 billion coins. It plans to promote the tokens for a minimum of $2 apiece in a $6 billion providing, pending approval from federal regulators. The corporate says the foreign money shall be backed by at least $6 billion in gold reserves it’ll dig up with Apache’s assist. The mining operation shall be funded by cash raised from the coin providing.
Regardless of the complicated association and the involvement of Apache, Swig described digau as safer and tangible than different digital currencies, most of that are untethered to real-world belongings and have values that may fluctuate wildly.
In an interview, Swig informed Insider he noticed points with the cryptocurrency {industry} at giant. “In lots of circumstances, it’s the wild, Wild West,” he stated. “Most individuals don’t know who owns them, who controls them, the place they’re actually positioned.
He added: “So we got here with what I believe is an effective method … of transparency, being domestically positioned. The gold backing, it’s in the US.”
Swig stated he and his companions within the coin can be “voluntarily submitting with the SEC.”
“As a result of we would like supervision” and steering, Swig stated.
The gold underpinning digau’s worth, nonetheless, hasn’t been extracted but, and Apache, which the enterprise is counting on to get well the dear steel, hasn’t unearthed a single ounce of gold, by its personal admission. It informed Insider in a press release that the extraction work can be dealt with by “third celebration contractors with many years of expertise.” It declined to call these companies.
A purported COVID-19 remedy
Final yr, Apache was accused by the Nevada secretary of state’s securities division of trying to promote unregistered securities to the general public to lift cash for a purported COVID-19 remedy that Nevada regulators labeled as a “scheme.”
“We all know criminals are opportunistic and use present occasions to cloak their schemes with an air of immediacy and legitimacy,” Nevada Secretary of State Barbara Cegavske stated in a statement issued by her workplace to announce the motion in opposition to Apache.
In a press release at the time, Apache described its supposed remedy vaguely, saying that it “was developed over a 20-year interval by a Harvard graduate,” was “derived from a well known plant,” and labored by “depriving the COVID-19 virus of oxygen and killing it.”
Apache stated on the time it had “put collectively a crack group to ramrod the testing” for the purported therapy and was planning to lift $2.5 billion from buyers to carry it to market.
In response, the Nevada secretary of state’s workplace imposed a cease-and-desist motion in opposition to the fundraising effort and launched an administrative motion in opposition to Apache that’s ongoing and will topic the corporate to tens of 1000’s of {dollars} in fines.
Quickly after it was focused by Nevada regulators, Apache stated it had deserted the fundraising effort and released a statement blaming the imbroglio on a dead man. Its senior director, Dr. Lawrence Madoff, it stated, had initiated the providing with out authorization from the corporate and in a fashion that was “grossly untimely.”
Madoff wasn’t available to elucidate his actions as a result of he had “died inside two days of the March 18, 2020 press launch” unveiling the remedy, Apache stated.
Consultants with a prison previous
In company information, Apache lists solely a handful of officers within the firm, with no point out of Walters or Huebner.
In a press release to Insider, two Apache executives who recognized themselves as Ira Glasser and Roger Flowers, minimized Walters’ and Huebner’s involvement with the corporate, describing them as “consultants.”
In a lawsuit uncovered by Insider that was filed collectively by Walters and Apache final yr in opposition to the insurance coverage firm USAA Common Indemnity in Nevada’s Eighth Judicial District Court docket, Walters identifies himself as Apache’s “controlling shareholder.” That civil case was later dismissed.
Glasser, the Apache govt, denied that Walters was a controlling shareholder within the firm.
In accordance with courtroom information, Walters has a prison historical past.
He was convicted of fifteen felony costs associated to fraud in Clark County, Nevada, in 2008 and sentenced to a minimum of eight years in jail and over $600,000 in restitution fines to victims he was discovered to have bilked of cash. The case was tied to an accusation that Walters had cast a deed to improperly take possession of a Las Vegas dwelling after which had used it as collateral to borrow cash in opposition to.
A few of these costs have been vacated in 2016, and his convictions have been lowered to 2 felonies for possessing a monetary forgery laboratory. Walters, who by then had spent a number of years in jail, was launched on time served, and his restitution was lowered to simply over $500,000.
That was Walters’ second stint in jail. Within the early 2000s, he was convicted of possessing cocaine and incarcerated in Indiana.
He was additionally beforehand the CEO of an organization that was implicated by the Securities and Alternate Fee in a pump-and-dump stock scheme, however he wasn’t accused of any wrongdoing in that matter and, on the time, denied data of the allegations.
Huebner, who’s listed because the registered agent for Apache in company information, was convicted on criminal charges within the mid-Nineties for his involvement serving to folks try and keep away from paying cash they owed to the IRS by declaring chapter and wiping the money owed clear.
Apache, in the meantime, is being sued in Nevada courtroom by a former worker, Denise Mraz, who alleges she outlaid $45,000 to cowl private bills for Walters, together with his lease, gasoline, meals, and cellphone payments and was by no means repaid. She stated that she took out a $275,000 private mortgage to buy fairness within the firm, however that after she gave Apache the cash, it claimed it couldn’t subject any extra inventory, however stored her money.
Within the swimsuit, she accuses Apache of misrepresenting its portfolio of mining claims and technical capabilities to extract metals from websites with a view to mislead potential buyers.
“Apache is nothing greater than a entrance for Walters and Huebner’s unlawful actions,” Mraz’s grievance alleges.
That case will go to trial subsequent yr. Mraz’s lawyer declined to remark. Apache didn’t touch upon the Mraz swimsuit.
Swig appeared unbothered by Apache’s doubtful previous.
“Apache has been superb, very protected, very simple,” Swig informed Insider. “We have now checked them out. I’d simply say on this specific sort of enterprise, there’s quite a lot of litter on the planet that isn’t essentially correct from my perspective.”
A spokesman for Swig stated Walters and Huebner had “paid their debt to society” and that their involvement in Apache was “not our concern.”
Digau shall be tied to mining claims its backers refuse to reveal
Swig’s firm Dignity Gold just lately introduced it had secured its first mining claim someplace in Lincoln County, Nevada, an almost 11,000-square-mile patch of desert scrubland and mountains about 50 miles north of Las Vegas, the place it’ll start extracting the gold for digau. The corporate says it has a geological report for the positioning valuing its mineral and steel deposits at almost $94 billion, together with about $7.7 billion of gold.
Michael Visher, the administrator of the Nevada state authorities’s Division of Minerals, informed Insider he was “not conscious of a undertaking in Lincoln County with … such a valuation.”
“If they’ve such a report, it is best to request it,” Visher stated in an electronic mail, referring to the geological survey that Swig says particulars his mining declare’s huge bounty of riches.
A spokesman for Swig declined to offer Insider with that report or the precise location of the mining declare in Lincoln County.
Swig’s quick rise and precipitous fall
Swig isn’t any stranger to controversy or the courtroom.
Within the 2000s, he constructed his real-estate funding firm, Swig Equities, into a significant Manhattan workplace proprietor, amassing a portfolio of roughly a dozen workplace buildings, primarily in decrease Manhattan, that have been collectively value lots of of hundreds of thousands of {dollars}.
However when the monetary disaster hit, Swig’s empire frayed.
A number of of Swig’s enterprise relationships devolved into headline-grabbing acrimony and litigation. In a single heated assembly, as an illustration, a companion of Swig’s turned so infuriated, he grabbed an ice bucket and slammed it against Swig’s shoulder, in response to articles on the time.
In a contentious battle in divorce court that started in 2010, Swig’s now ex-wife Elizabeth Macklowe alleged in courtroom paperwork that he “motioned” to strike her of their 5 1/2-bathroom co-op at 740 Park Ave. whereas in a drunken rage through the depths of his monetary travails in 2009.
He owed collectors tens of hundreds of thousands of {dollars} and bought off lots of the workplace buildings he had invested in.
Regardless of this, Swig continues to record a few of these buildings, together with 44 Wall St., 80 Broad St., and 5 Hanover Sq., in his profile page on the website of Brown Harris Stevens as properties he “has bought and/or is within the means of creating,” when, in truth, he hasn’t owned them for years.
Swig stated to Insider that he posted these properties as one would record previous jobs on their résumé and stated he continued to personal different workplace buildings in Manhattan, together with 48 Wall St., 110 William St., and seven Hanover Sq..
The homeowners of 110 William St., a partnership between Pacific Oak Capital Advisors and Savanna, stated Swig had no possession curiosity in that property.
An individual with direct data of the possession construction of seven Hanover Sq., in the meantime, informed Insider that it was doable the Swig household had a small stake in that constructing however that the curiosity would have been structured many years in the past and didn’t contain Kent.
Kirk MacDonald, a principal at MacDonald & Cie, an funding agency that owns the 33-story, 320,000-square-foot workplace constructing at 48 Wall St., informed Insider that Swig had owned a small minority stake in that property years in the past with a handful of different real-estate buyers. However within the aftermath of the monetary disaster, Swig and the opposite buyers have been unable to make required capital calls to fund the constructing’s operations and maintenance and have been “worn out,” MacDonald stated.
MacDonald stated that he continued to be buddies with Swig and that Swig had been pressured to pay again monumental money owed to lenders and different collectors that have been incurred throughout his monetary difficulties a decade in the past.
“He has labored himself out of in all probability $120 million of debt, and he has carried out an excellent job of it in opposition to all odds,” MacDonald stated. “There’s not a lot left that he owes, and he’s paying it again usually.”
Swig informed Insider that the sum he has needed to repay in recent times was “nearer to $130 million.”
Swig’s rebound
Extra just lately, Swig has tried to current a sunnier image of his enterprise and observe document. In a recent interview with Insider, he touted how he had professionalized the administration of his household’s real-estate holdings to assist higher protect its wealth throughout generations.
He has begun talking in public extra often at numerous real-estate-industry occasions. He informed Insider that he has been a recurring visitor over the previous yr on the Bloomberg anchor Carol Massar’s radio present. And he has actively publicized the brand new digau coin. In a single current story, Swig credited his 26-year-old son, Oliver Swig, who is listed as a “member of the board of advisors of Dignity Gold,” with giving him the thought for the cryptocurrency.
Whereas Swig acknowledges the monetary tumult he suffered years in the past, he rejected the notion that his current actions amounted to a comeback or rebuilding of his fame.
“I’m not attempting to rebuild or do something with my fame as a result of it was by no means broken,” Swig stated.
“I used to be financially harm when Lehman Brothers went below, and I had a really tough scenario, however I don’t suppose my fame suffered from it – in truth, fairly the alternative,” he added. “On a reputational foundation, I’m one of many solely individuals who ever stood up and paid each financial institution again each penny.”
An uncommon digital token
Cryptocurrency specialists say Swig’s digau token seems uncommon, at the same time as there was a proliferation of latest cash in recent times.
“I’ve not seen a single gold-backed cryptocoin like this that has been profitable,” Felix Shipkevich, a New York Metropolis lawyer who has labored on cryptocurrency choices, stated. “It brings up quite a lot of questions, together with, is the gold that they are saying they’re going to mine actually there? And whether it is, why do you’ll want to tokenize it? Why not simply dig it up and promote it like standard mining operations do?”
The digau cryptocurrency’s hyperlink to mining within the American West ties it to a murky world the place outsize guarantees and chicanery are widespread, mining specialists say.
“I’ve labored within the mining {industry} for a very long time, and I can’t inform you what number of occasions folks have come to me with a declare that they’ve found an enormous deposit of gold,” stated Carl Nesbitt, an affiliate professor of metallurgical engineering within the Division of Mining and Metallurgical Engineering on the College of Nevada, Reno. “However once you break it down, they’re snake-oil salesmen.”
In accordance with its web site, Apache Mill Tailings claims to specialise in extracting metals from mine tailings, a sandlike byproduct of standard mining that may usually comprise poisonous substances from the earth like arsenic and heavy metals. Tailings might be discovered on the floor of many mines within the Western US and typically do maintain precious metals or minerals {that a} web site’s authentic miners weren’t capable of extract.
Slightly than a bonanza of riches, the enterprise of processing tailings utilizing trendy gear to strip out remnant metals like gold is usually pricey and labor-intensive, requiring substantial investments in costly extraction gear, heavy vans, and energy. Operators often intention to reap a modest revenue after years of labor, Nesbitt stated.
“I see this as simply one other scheme, for lack of a greater phrase,” Nesbitt stated. “Let’s promote inventory – now they’re calling it cryptocurrency – and attempt to make the worth go up by extracting the gold. However there’s no assure they’ll ever get it out.”
