As a seasoned investor with decades of experience in traditional markets, I have learned to be cautious and vigilant when it comes to new investment opportunities. The case of Tangible, now known as re.al, is a stark reminder of why due diligence is crucial.

A week prior to the crisis in October 2023, an investor named ZilAYO began noticing signs of potential trouble in the crypto real estate venture called Tangible.

Previously, ZilAYO hadn’t expressed any issues. He had put $50,000 into the primary token of Tangible, called USDR – a digital currency that’s supposed to be equivalent in value to a single U.S. dollar.

Beyond providing stability, USDR also offered yields, and it had consistently delivered on both aspects up until that point. According to ZilAYO’s calculations, farmers of “degenerated stablecoins” such as himself could potentially earn returns ranging from 20% to 80% from USDR. A significant factor contributing to these returns was the real estate assets backing USDR, which generated rental income.

Tangible Corporation, having utilized funds from investors, acquired approximately 200 residential properties as collateral for USDR. Income generated from tenant rents contributed significantly to the returns. This project was experiencing rapid growth; by early October 2023, Tangible presented its venture capital potential at a staggering valuation of around $100 million.

Everything seemed to be progressing smoothly, so when ZilAYO found something amiss, he merely chuckled: It turned out that the brother of Tangible’s CEO, Jagpal Singh, was Joshvun Singh, who ran BMS Luna Stacks – a company specializing in rare wines, gold bars, and real estate properties. These tangible assets were what Tangible eventually transformed into tokens.

“I blindly trusted” Tangible would keep USDR stable, said ZilAYO.

Despite this, he decided to sell a short while later, after realizing from the Terra-Luna catastrophe that prosperity in stablecoins can be fleeting.

He got out just in time.

On October 11, 2023, a sudden rush of withdrawals, reminiscent of a bank run, depleted USDR’s liquid resources, leaving behind its less fluid real estate holdings. As investors grew anxious and unable to access their funds, USDR plummeted from a dollar to just 50 cents.

That plunge is well-known. But there’s more to the story.

As a crypto investor, I recently stumbled upon an intriguing revelation through CoinDesk’s investigation. The Singh brothers had devised a profitable, covert scheme: my brother Josh’s firm was purchasing properties and swiftly selling them to companies owned by my other brother Jagpal – ultimately ending up in the hands of USDR investors. These sales often featured markups exceeding 20%, shedding light on some potentially questionable dealings within our investment landscape.

To shed light on a previously undisclosed business agreement, CoinDesk delved deeply into numerous U.K. documents such as loan records, company records, and land registries.

British land records indicate that at least £875,590 was funneled from USDR’s treasury to the brothers’ companies through upselling, but the actual discrepancy could be significantly higher, potentially reaching millions of pounds. Essentially, any excess payment was taken from funds saved in USDR’s treasury by investors.

According to a spokesperson, the markups had been made public earlier, encompassing costs related to business operations. However, the representative chose not to share details about where, when, or by whom this disclosure took place.

As an analyst, I can express it this way: I’ve been actively engaged in ensuring that USDR investors are fully compensated. Regarding specific queries, my focus is solely on the redemption process at the moment, and I prefer not to delve into further details at this time.

Joshvun Singh did not respond to a request for comment by press time.

Get real

Advocates of “real-world asset” (RWA) projects, which convert traditional investments into blockchain tokens, believe that cryptocurrency can bring liquidity to less active sectors of finance. Unlike physical property deeds, these tokens are simpler and quicker to trade. By tokenizing a deed, it becomes possible for anyone worldwide to make an instant trade.

In the very same month that USDR went under, it was projected that RWA (Risk-Weighted Assets) could potentially grow into a $10 trillion industry by the year 2030. However, institutions on Wall Street tend to act cautiously, adhering to every financial regulation as they make their moves.

As a researcher, I’ve noticed that crypto firms operate with a great deal of autonomy. Unlike traditional institutions that often adhere to strict regulations, these firms leverage the decentralized nature of public blockchains and establish their own guidelines for best practices.

Primarily, Tangible functioned as a British venture; however, it found a way around UK laws by tokenizing overseas real estate, thus avoiding regulations applicable to Real Estate Investment Trusts (REITs) within the UK.

An employee once called USDR a “money REIT” on Discord. Investors told CoinDesk they liked USDR because they thought crypto was superior to stock market fare.

1ceo, a USDR investor, stated that blockchains can provide a more accurate understanding of the investment one is making.

On the other hand, REITs in the U.K. are equally open. They offer comprehensive financial reports to their investors.

In my role as an analyst, I’ve observed a situation where Tangible, the company in question, has withheld crucial legal details from its investors despite repeated requests for proof of ownership. The Chief Marketing Officer, Mike Slatkin, once characterized the company’s legal opinion as a “competitive advantage” that carried a substantial price tag to acquire.

Family affair

On April 19, 2023, Jagpal Singh led a specific real estate investment vehicle called Tangible, purchased a two-bedroom house located in Halifax, England. In the records provided to USDR investors, the seller’s name was concealed by Tangible, and it was indicated that this SPV paid £167,782 for the property.

For potential investors, the property seemed appealing due to its cost being lower than a recent evaluation conducted by Tangible. This appraisal suggested that the house could be sold for approximately £170,000 in a fair and open market transaction.

It was a short arm.

The black boxes concealed the complete tale: On April 19, Joshvun Singh’s firm BMS Luna Stacks purchased a house for £138,500. On the very same day, the company then sold the property to Jagpal’s Special Purpose Vehicle (SPV) for £167,782, which represented a 21% increase in price.

Tommaso Gabrieli, an associate professor of real estate at University College London, stated that such a rapid increase in price within a single day or brief period appears unjustified based on any conceivable reason.

Real estate firms generally shy away from purchasing overpriced properties from entities closely tied to key figures such as the CEO’s brother-led companies, according to Nick Mansley, head of the University of Cambridge’s Real Estate Research Centre.

Upon examining Tangible’s unspecified markups, Mansley observed, “It seems challenging to make a case for investors’ interests being prioritized – as they ought to be.

‘Unjustified markup’

Tangible obfuscated its markups behind redacted sales records, cherry-picked valuations and fees.

To peel back this onion, consider Westcott House, a 24-flat building in Hull, England.

By the end of June 2023, Tangible transferred Non-Fungible Tokens (NFTs) symbolizing ownership of 24 apartments to USDR’s digital wallet, as per blockchain records, at a price of approximately $2.32 million in cryptocurrency.

Redacted documents reveal that on June 24th, approximately twenty-four Special Purpose Vehicles collectively purchased a building containing 24 apartments for approximately £1.56 million. Translating this value to dollars, Tangible assessed the cost at around $2.06 million. In addition, it included an extra $292,042 for various, transparently detailed fees. Ultimately, these charges were charged to USDR’s treasury.

According to a valuation report from Tangible, the 24 apartments were estimated to be valued at approximately £1.53 million on June 20th. This valuation might not seem excessively high to investors, as it appears Special Purpose Vehicles (SPVs) only paid a relatively moderate premium of 2.45%.

But Tangible hid other things.

Initially, the entire report from the appraiser will be accessible to investors. However, they can only view his “unique assumption valuation” for the freehold, or property and land, if the leaseholds of Westcott House are sold individually over an extended period (which may take several months).

In the second point, it’s noted that the name of the seller, BTS TNFT LTD, a company led by Jagpal, is omitted from the records provided by Tangible. Despite transferring the leases of 24 properties to Tangible Special Purpose Vehicles, BTS TNFT continued to own the freehold of Westcott House.

Jagpal effectively transferred the leaseholds to a company he owns entirely; public records in the UK confirm that he is the single shareholder of BTS TNFT, which in turn is the only shareholder of the Physical Special Purpose Vehicles.

Thirdly, It’s unclear when exactly BTS acquired Westcott House’s freehold, but signs point towards them paying approximately £1.425 million shortly before transferring the leaseholds to Tangible SPVs for £1.56 million. As per records from the U.K. registry in November, BTS had valued the freehold at £1.425 million, a figure that Gabrieli stated reflected the price they had paid.

Gabrieli expressed that the 10% premium appears to be an unnecessary additional cost over a brief duration. Additionally, it’s reasonable to assume that the value of a freehold property would exceed that of a leasehold one.

A building and its land should be worth more than the sum of its flats.

Final tab

According to an examination by CoinDesk of data from the United Kingdom’s land registry, the companies owned by Jagpal and Joshvun contributed a minimum of £875,590 in markups to the cost of properties belonging to Tangible.

Despite some gaps in the registry’s data, detailed figures published by Tangible in 2024 (post their property purchasing halt and well after the USDR’s crash in October 2023) suggest that potential overpricing could amount to approximately £2.5 million.

The given figure represents the total difference between what Tangible SPVs paid for each property and the agreed price (combined payments made by BTS and BMS) for those same properties, as compiled from 207 NFTs representing UK properties held in USDR’s treasury by CoinDesk.

Starting from mid-2024, Tangible has started to clearly state on their disclosure page that they follow a strong underwriting process for property valuations and transactions, aiming to maintain the utmost precision and honesty in all their dealings.

Even though parts have been blacked out, Tangible has publicly declared in other places that they obtained properties from BTS TNFT. This declaration does not include any information about a markup or about Joshvun’s company.

‘I just ape’

A year following the demise of USDR, investors are yet to receive their initial investments back. Before returning these funds, the company formerly known as Tangible (now rebranded as re.al) needs to sell off approximately 200 U.K. properties, valued collectively at around £27 million.

The 24 apartments in Westcott House illustrate just how challenging it can be to recoup expenses. Notably, Jagpal Singh’s firm managed to sell the leaseholds for higher-than-average prices on the very same day of the evaluation – a remarkable achievement given that the report projected sales might take as long as two years.

One way to rephrase the given sentence in a more natural and easy-to-read manner is: “What speed and cost does it incur if Tangible doesn’t sell its properties to itself, but instead liquidates them?

In a conversation with seven veteran investors specializing in USDR, it was revealed that six out of seven expressed their reluctance to invest in the token, as they found out later that Tangible was purchasing overpriced properties from affiliated parties.

A DeFi builder, who invested $8,000 into USDR in early 2023 and wished to keep his identity confidential to protect his professional ties, emphasized that hindsight declarations are not sufficient. Prior to the investment, he had thoroughly scrutinized USDR’s real estate collateral and even requested evidence to confirm Tangible’s ownership claims.

As a resident of Web3, I believed that Tangible would uphold the same level of transparency as the blockchain upon which USDR is constructed, asserted the investor. If charges apply, they should clearly disclose these costs to ensure full transparency.

Others lacked caution, as Donk3ynuts, an investor, admitted he hadn’t checked any papers prior to investing a substantial amount (thousands of dollars) in USDR without thorough examination.

“I don’t read that sh*t. I just ape,” Donk3ynuts said.

‘No clue’

Since March, Pingu1 has served as a paid moderator for Tangible’s Discord platform, and has been an investor in USDR for quite some time. In a recent conversation, Pingu1 expressed continued optimism about these investments.

The employees who could be physically present were given “enough opportunity to vanish into the wilderness, much like other groups did,” he pointed out.

Still, Pingu1 said he has “no clue how the company operates.” He wants clarity on these allegations just like any other investor with tens of thousands of dollars on the line.

Pingu1 admitted that they don’t understand the workings of a Real Estate Investment Trust (REIT), so their strategy is to rely on the expertise of the team, study the documents, check the contracts, and cross their fingers for positive outcomes.

Donk3ynuts isn’t ready to embrace financial regulations, even after getting burned by Tangible.

Donk3ynuts explained, “There will be talented performers as well as those who underperform, but this diversity comes with the territory as we navigate the emerging world of RWA tokenization.