The SEC is asking questions about Boxabl, the tiny-home startup that boasts Elon Musk and Post Malone as fans

• The SEC recently questioned former employees at Boxabl.
• The questioning follows complaints from Boxabl investors, customers, and former employees.
• Recent financial information shows the company’s business prospects are off to a rocky start.

Boxabl has captured the public’s imagination in its six years of existence with its innovative tiny homes and celebrity endorsements from Elon Musk and musician Post Malone.

The company’s father-and-son cofounders, Paolo and Galiano Tiramani, deftly tapped into that groundswell using online marketing and a knack for showmanship, raising more than $150 million from investors since 2020. The majority of it was raised by the general public through several rounds of crowdfunding.

Boxabl has now piqued the interest of regulators.

Two people familiar with Boxabl’s operations and bookkeeping told Insider that the Securities and Exchange Commission’s office in Salt Lake City, Utah, had contacted them to discuss the company. One had been served with a subpoena, while the other had been warned to expect one. The individuals asked not to be identified for fear of jeopardizing a confidential investigation.

Meanwhile, three former Boxabl employees said they were contacted and interviewed by the SEC in recent weeks to discuss Boxabl, including the company’s business practices. The former employees also refused to be identified because the SEC had told them not to publicly disclose their communications with the agency.

Boxabl’s director of marketing, Galiano Tiramani, did not respond to requests for comment.

It is not immediately clear what the SEC is interested in. Boxabl has been cleared of all charges. The SEC’s investigations do not always result in civil charges or enforcement actions.

“The SEC does not comment on the existence or nonexistence of a possible investigation,” said Cory Jarvis, an SEC spokesman, in an emailed statement to Insider.

Nonetheless, the regulator’s investigation comes as an increasing number of investors, customers, and former employees have voiced concerns about the buzzy startup.

Bright prospects have met a rockier reality

Boxabl rose to prominence for its 350-square-foot tiny home, the Casita, which it claims will cost $60,000 — far less than the cost of constructing a comparable structure from the ground up. The tiny houses fold up like a suitcase, allowing them to be hitched to a trailer and transported to customers more easily by road.

Boxabl reported in its most recent financial statement for 2022 that it has a waiting list of 170,000 people for the homes and has received more than $4.2 million in deposits from 8,300 customers.

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According to the company, if all of the interest translated into sales, it could generate $10 billion in revenue. However, its seemingly limitless business prospects have had a rocky start.

The US military ordered 156 Casitas, which were installed at Guantánamo Bay in 2021 and 2022, but they were plagued by leaks. Authorities halted the installation of another 176 homes purchased by a mining company in Arizona earlier this year because Boxabl had not received the necessary certifications in the state. The company was fined $48,000 for the incident.

Boxabl explained that the situation arose because the company “understood the specific codes” that govern modular housing development in Arizona “did not apply” to the mining site.

A spokesman for Arizona’s Department of Housing refuted Boxabl’s claim.

“Staff held multiple discussions with Boxabl, providing detailed information on what was required for certification prior to Boxabl shipping units to Arizona and the issuance of the citation,” an agency spokesman, Dave Cherry, said.

According to Travis Hess, an executive at the Pronghorn Group, a real-estate development firm that collaborated with Boxabl on the Arizona project, 48 Casitas were installed at the site prior to the state shutdown. He wasn’t sure if the rest of the order would be filled.

Boxabl stated in its most recent financial statement that the remaining units “that were previously reserved for that project can now be sold for other projects.”

Hess stated that his experience with Boxabl has made him skeptical of the enticing economics of prefabricated housing. After accounting for associated costs such as preparing foundations for the Boxabl units and installing utilities, he stated that each Boxabl home completed by Pronghorn for the mining company cost more than $100,000.

“The actual value proposition of any type — this is not just at Boxabl — but any type of modular product is simply not there,” Hess explained.

Growing expenses and uncertain sales

Because of its public solicitations for funding, Boxabl is required to file financial statements with the SEC, but it only released its 2022 financial results in August and has not provided any financial information for 2023.

According to the most recent filing, the company has not yet received the state-level certifications required to sell its homes anywhere in the country, though it has stated that it has started the process in Arizona, California, and Nevada and expects to be approved by the end of the year in those states.

Growing expenses and an inability to sell units have strained its financial position. In 2022, the company said it made nearly $11 million in revenue but spent nearly $24 million on production costs associated with building the homes it sold. Another $20 million was spent on overhead, resulting in a $33 million operating deficit, more than doubling its operating loss in 2021.

Other questions have dogged the company, such as the involvement of a man named Hamid Firooznia, who was named by a federal judge in 2017 as one of a group of “conspirators” in a plot to conceal the Iranian government’s ownership of a New York City office tower. In that case, Firooznia was not charged. Firooznia previously served on Boxabl’s board of directors before being abruptly “removed” earlier this year after Insider inquired about his background and role at the company.

Even after leaving the board, Firooznia was seen visiting Boxabl’s headquarters in North Las Vegas to meet with employees. Boxabl stated in its most recent financial filing that it paid Firooznia $210,000 in 2022 for “consulting services.”

Firooznia’s secretary did not respond to an email.

According to two people familiar with the company’s finances, the company had few of the typical financial controls used by large businesses to monitor spending and oversee cash accounts. Day-to-day spending was largely managed by Caroline Larkin, an employee of Boxabl and the longtime romantic partner of Boxabl’s 62-year-old CEO, according to these sources.

Experts in corporate governance criticized the arrangement, saying it could create a conflict of interest. Prior to joining Boxabl, Larkin had no training or experience in accounting or financial oversight.

Meanwhile, the Tiramanis appeared to spend lavishly on upscale automobiles and multimillion-dollar real estate. According to corporate governance experts, the pair sold about $5 million of their stock in a fundraising round in 2022, a large divestiture for the top executives of a nascent startup that has boasted about its future potential for dramatic growth. The two continue to be the majority owners of the company.

According to the company’s recently released financial statement, the Tiramanis increased their base salaries from $400,000 to $595,000 each in 2023 — a nearly 50% increase despite the company’s losses. In 2022, the father and son received total compensation of $785,400 and $944,970, respectively.

Meanwhile, there have been indications that some of the company’s investors want out.

Leader Capital, a mutual fund manager based in Portland, Oregon, filed a lawsuit against Boxabl in September over delays it blames Boxabl for imposing on its efforts to sell stock in the company. In its complaint, filed in Nevada district court, Boxabl stated that it had agreed to sell its shares to an unnamed buyer for $0.57 per share, which was less than the $0.80 per share price Boxabl had charged investors in recent funding rounds. Leader Capital would have made about $3.7 million from the deal, which it said fell through due to the delay.