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

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

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

Now, Boxabl has attracted attention from regulators. 

Two people with knowledge of Boxabl’s operations and bookkeeping told Insider that they had been contacted by the Securities and Exchange Commission’s office in Salt Lake City, Utah, to discuss the company. One had received a subpoena, while the other was told to expect one. The individuals asked not to be identified out of concern they would be violating a confidential inquiry. 

Three former company employees, meanwhile, said they had been contacted and interviewed in recent weeks by the SEC to speak about Boxabl, including the company’s business practices. The former employees also did not want to be identified because the SEC had instructed them not to publicly disclose their communications with the agency.  

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

It is not immediately clear what the focus of the SEC’s interest is. Boxabl has not been accused of any wrongdoing. Inquiries by the SEC don’t always lead to civil charges or enforcement actions. 

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

Still, the scrutiny by the regulator comes as a growing number of investors, customers, and former employees have raised complaints about the buzzy startup. 

Bright prospects have met a rockier reality 

Boxabl gained fame for its 350-square-foot tiny home called the Casita, which it has said will be priced at $60,000 — far less than the cost of building a commensurate structure from the ground up. The diminutive dwellings fold up like a suitcase, allowing them to be hitched to a trailer and transported more easily by road to customers. 

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

Some Casitas being assembled in Boxabl’s North Las Vegas factory. Boxabl

The company said that if all the interest translated into sales, it could reap $10 billion in revenue. But its seemingly boundless business prospects have been off to a rocky start. 

The US military ordered 156 Casitas that were installed at Guantánamo Bay in 2021 and 2022, but those were marred by leaking issues. The installation of another 176 homes procured by a mining company in Arizona was halted earlier this year by authorities because Boxabl had not received the necessary certifications in the state. The company paid a $48,000 fine over the incident. 

Boxabl said the situation resulted because it “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 contradicted Boxabl’s description.

“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,” Dave Cherry, an agency spokesman, said.

Travis Hess, an executive at the Pronghorn Group, a real-estate development firm that partnered with Boxabl on the Arizona project, said that 48 Casitas were installed at the site before the state shutdown. He was unsure whether the remainder of the order would be fulfilled. 

In its recent financial statement, Boxabl noted that the remaining units “that were previously reserved for that project can now be sold for other projects.” 

Hess said his experience working with Boxabl left him skeptical of the enticing economics of prefabricated housing. After factoring in related costs, such as preparing foundations that the Boxabl units would sit on and installing utilities, he said that each Boxabl home that Pronghorn completed for the mining company wound up costing 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 said. 

Growing expenses and uncertain sales

Boxabl is required to file financial statements with the SEC because of its public solicitations for funding, but it released its 2022 financial results just this August and has not offered any financial information for 2023. 

According to the recent filing, the company has not yet received the state-level certifications necessary to sell its homes anywhere in the country, although it said it’s begun that process in Arizona, California, and Nevada and expects to be approved in those states by the end of the year. 

Its financial position has been strained by its growing expenses and inability to sell the units. The company said it took in nearly $11 million in revenue in 2022 but spent almost $24 million on the production costs associated with building the homes it sold. Another $20 million was spent on overhead, amounting to an operating deficit of roughly $33 million, more than double its operating loss in 2021.

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

Even after Firooznia’s exit from the board, he was seen visiting Boxabl’s headquarters in North Las Vegas to attend meetings with staff. In its recent financial filing, Boxabl said it paid Firooznia $210,000 in 2022 for “consulting services.”

An email to Firooznia’s secretary went unanswered.

Insider also previously reported that the company had few of the typical financial controls employed by large businesses to monitor spending and oversee cash accounts, according to two people who with knowledge of the company’s finances. Day-to-day spending was largely managed by Caroline Larkin, these people said, an employee of Boxabl and the longtime romantic partner of Paolo Tiramani, Boxabl’s 62-year-old CEO. 

Experts on corporate governance frowned on the arrangement, suggesting that it could pose a conflict of interest. Larkin had no training or experience in accounting or financial oversight previous to her role at Boxabl. 

The Tiramanis, meanwhile, appeared to spend lavishly on upscale automobiles and multimillion-dollar real estate. In a fundraising round in 2022, the pair each sold about $5 million of their stock, a large divestiture for the top executives of a nascent startup that has boasted about its future potential for dramatic growth, the corporate governance experts said. The pair remain the company’s majority shareholders. 

The company’s recently released financial statement said that the Tiramanis raised their base salaries from $400,000 to $595,000 each in 2023 — an increase of nearly 50% that came despite the company’s red ink. The father and son earned $785,400 and $944,970, respectively, in total compensation in 2022. 

There have been signals, meanwhile, that some investors in the company want out. 

Leader Capital, a mutual-fund manager based in Portland, Oregon, sued Boxabl in September over delays it blames Boxabl for imposing on its effort to sell stock that it holds in the company. In its complaint, filed in Nevada district court, the company said it had arranged to sell its shares to an unnamed buyer for $0.57 each, less than the $0.80 per share price Boxabl had charged investors in recent funding rounds. Leader Capital would have netted roughly $3.7 million in the deal, which it said fell apart because of the delay.