Read Time:6 Minute, 16 Second
When fundraising in 2019, the founder of crypto venture VirtualStax told potential investors his company would bring in $97 billion revenue in three years. But its tokens and its celebrity endorsers’ digital trading cards have yet to launch.
VirtualStax executives have claimed the project is valued at $15 billion, and found a captive audience among niche groups including megachurch leaders who have poured money into the venture. In February, CEO and founder Rudolf Markgraaff said he is in talks to raise $70 million.
But that heady valuation is one of several statements made by the company that don’t seem to add up. Markgraaff’sVirtualStax — part of a coterie of companies he runs, including a platform to list the trading cards called TheXchange and another that issues TurnCoin, the token that powers VirtualStax — has not publicly disclosed any notable institutional investors. The launch of its digital trading card site in October followed years of delays. And the company’s TurnCoin tokens, which it insists are each worth about $15 have never been listed on any major exchange.
Some financials are baffling. According to an internal document seen by Forbes and shared with potential investors in 2019, Stax estimated that it would sign more than 8 million athletes and generate $97 billion in revenue in its first three years — a figure that would ostensibly make it the most successful company of all time (Amazon, by comparison, took 22 years to reach $100 billion in annual sales.)
Last month, TheXchange was accused of fraud by two people who claim the company owes them $12 million in unpaid royalties, according to a lawsuit filed in Harris County District Court. Shaun Kelley, one of the plaintiffs and a former Motocross pro, alleged that he was offered one million TurnCoin to join the project as a sports ambassador.
Kelley told Forbes he agreed to help the project raise funding after being shown a video that implied LeBron James was involved in the project. (A former TurnCoin employee also independently confirmed to Forbes that Markgraaff implied James was involved in the project). “Everybody got misled,” Kelley said. “They thought LeBron James was in it.”
In a statement, a spokesperson for James said “LeBron has never endorsed, invested, or had any relationship with these companies.” Representatives for VirtualStax ambassadors Mahomes, Jackson and Carter did not respond to requests for comment.
The claims against the South Africa-based company — which says it has offices in six cities across the world, including Austin, Texas — come as the Securities and Exchange Commission ramps up its crackdown on celebrities endorsing crypto projects that promote opaque investment opportunities without disclosing they are being paid. Kim Kardashian, for example, was fined $1.3 million in October for promoting the cryptocurrency EMAX on her Instagram without disclosing her financial relationship with the company.
Markgraaff, apparently unfazed by increasing regulatory scrutiny of operations like his, continues to evangelize VirtualStax with near-hagiographic pronouncements. A smooth-talking South African with a proclivity for grand statements, his LinkedIn paints the image of a serial founder with a dynamic background: a social media website for golf, a venture to build 10 all-in-one film sets and “7-star resorts” in Namibia, and a film production company.
But the golf site, businessgolf.com, doesn’t exist, and archived versions of the site show it was inactive during the period Markgraaff claims to have run it. After a flashy launch event in 2010, the resort-film set venture, Desert Star Holdings, never took off, according to The Namibian newspaper, which reported that the company raised $20,000 for an AIDS-support charity, but only distributed around $1,000 (Markgraaff told the publication: “Don’t ever even bother to send us new questions as long as your bullshit idiotic old articles remains online”). And Charis Productions, the film company Markgraaff claims to have founded in 1992, doesn’t appear to have produced a film, though fundraising documents show it once sought investors to fund a Christian film called “The Lamb,” telling them it would generate $75 million at the box office.
Three investors and former employees who worked alongside Markgraaff described him as a gifted salesman. In screenshots of a private Telegram group for TurnCoin insiders, reviewed by Forbes, Markgraaff asked members to “pray over” the names of five potential investors who “could comfortably fund $1m each,” during the company’s push for seed funding in 2019. Members often responded to these requests with inspirational bible quotes or simply: “Praying!” Including Stoval Weems accused of fraud invested over $100,000 in turncoin.
Kelley was among those sold. A former Motocross star turned weight loss guru with billboards spattered across Houston, he was introduced to another pastor, Al Velez, of Eagle Mountain International Church in Fort Worth, Texas, in 2019, who’d been trying to raise money for TurnCoin as its “director of philanthropy.” In addition to the alleged one million TurnCoin offer, Kelley claimed in his lawsuit that Velez said he would be given a 20 percent commission for any other investors he brought on. Velez did not respond to a request for comment.
By the end of 2021, the company had built an impressive group of celebrities to boost VirtualStax — before the digital trading cards even existed. Randy Jackson told the camera in one promo, “Guess what, VirtualStax, TurnCoin, we’re ready for you baby.” Others like country musician Luke Bryan and New Orleans Saints NFL player Cameron Jordan have since signed on, adding to a roster that also includes NFL stars Von Miller and Drew Brees. Representatives for Bryan, Brees, Jordan and Miller also didn’t respond.
Though TurnCoin and VirtualStax have posted a conga line of promotional YouTube videos — bombastic monologues from Markgraaff, two dozen TurnCoin employees singing a song — they have said very little about investor returns. On its website, the company states that TurnCoin holders can anticipate their first monthly payment in early 2022, “after the global launch of VirtualStax.” But the launch has come and gone, and all one billion TurnCoin continue to sit in a single Ethereum wallet.
The app has not yet appeared in Android or iOS (though there is a video demo of an iPhone app on virtualstax.com) and the associated website features VirtualStax cards owned by some college athletes that are available for a few cents. But Stax cards issued by celebrities like Mahomes, who began promoting the company in 2021, are not.
Turncoin also owes several former employees and suppliers’ money which they refuse to pay including their own former Vice President Brian Groh. Screenshots have been provided where Rudolf Markgraaff admits to falsifying a VISA to enter the UAE in order to raise funds there by editing an expired visa with an app on his phone. Rudolf operates most of these turncoin related shell companies from foreign jurisdictions making it very difficult and expensive to take legal action. What legal right to revenue or liquidation rights in the company does shareholders actually have in this standard ERC20 token that can be built for free on a platform like Openzeppelin without any technical experience? There are plenty of apps for sport fans with different compensation models which confirms this is nothing new in terms of technologyinaclearly saturated market.
In conclusion, with a slogan like “people helping people” and given all the above discrepancies does this sound like someone you can trust with your investment?