Karatbars Ordered to Close Amid Pyramid Scheme Accusations

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Karatbars, a German cryptocurrency company whose project combined a cryptocurrency bank, a Madagascan gold mine, and a multi-level marketing style affiliate approach, has been told to shut down by German regulators after it was classed as a pyramid scheme. The project, which was publicly endorsed by soccer stars such as Patrick Kluivert, Roberto Carlos, and Lothar Matthäus, was served a cease and desist order by the authorities on Tuesday, based on KaratGoldCoin (KBC) tokens being issued without a license.

“A New World”

Karatbars was founded in 2011 by Harald Seiz, a former vacuum cleaner salesman, who promised to revolutionize the global financial system through the token. After years of plugging away and making little headway, Seiz decided to go all out in 2018 and 2019.

Seiz conducted an ICO in 2018, raising $100 million from investors, much of which went on marketing the product, including arranging glitzy presentations featuring former leading lights of the soccer world. In one presentation video posted on YouTube, Seiz is seen dangling the carrot of instant riches by talking to the audience, made up of Karatbars affiliates, about Lamborghinis and luxury watches. The former soccer stars are then seen praising the company and the project, calling it, among other things, “a new community, a new world” and stating that they hope “everybody will join this platform”.

Warnings Not Heeded

Karatbars has listed a fully licensed “cryptocurrency bank” and Madagascan gold mine containing some €900m ($990 million) worth of gold among its assets, which Siez has managed to protect from authorities, explaining why the KBC coin has barely dipped in value in the wake of the news. Karatbars is no stranger to controversy, having been declared a pyramid scheme by Namibian authorities in May this year, while Florida’s financial regulator last month denied that it had been given a banking license.

As far back as 2014, Quebec’s Financial Markets Regulator warned investors to “be cautious” about the company, with a similar warning published by Africa’s Financial Sector Conduct Authority (FSCA) earlier this week. The token was also promoted by John McAfee, who also threw his weight behind Universa, which this week pretended it had signed a deal with the Tunisian Central Bank to launch the E-dinar, which should tell you all you need to know about its credentials.