Karatbars & KaratGold coin (KBC) – Deeper look at 9 red flags!

KaratGold Coin (KBC)… Is it a scam or is it legit? Is this Bitconnect with a gold component or is there more to it? In this article, let’s take a closer look at the company behind KBC as well as several red flags of KBC, their crypto coin. 

Quick note: If you have your own opinion about KBC (or other crypto projects), please share it with the entire crypto world at CryptoCanary! Here’s the link to KBC’s page for easy access: https://cryptocanary.app/review/Karatgold+coin

Parent company – Karatbars International

To begin, we researched the parent company of KaratGold Coin, Karatbars International. Karatbars International is a German company founded in Stuttgart in 2011 with a branch in Singapore. They sell gold products online to an international customer base. According to the website, all of their gold is produced and sourced from Turkey. Originally, the company only participated in the gold market; however, since 2018, they have started selling with cryptocurrency too. 

The company’s vision that they try to sell is that the current fiat-based monetary system is flawed, and if the financial system collapses, gold will be the replacement of currency. Therefore, they believe it is important and lucrative to own gold. Karatbars International wants people to buy their card and CashGold products. These are easily exchangeable pure gold pieces in small units that will be “more transaction friendly” if fiat collapses. Finally, they expect gold to be a good investment and believe investors would benefit from gold value appreciation. 

Karatbars International is led by CEO Harald Seiz. He appears on stage and in promotional videos often and is promoted as their visionary and prominent leader. Also, he has his own Wikipedia page that covers the publication of his five books. Two of the books are sold on Amazon called “The Future of Money” (the role of gold in the money system) and “Think Big” (general entrepreneurship). 

The company produces various interview promotional videos in order to appear as if the media is interested in the company. For example, in one interview style video, the New York Stock Exchange was in the background of the video, but the company has no ties to Wall Street at all. This is a technique often used as image building to give viewers the impression they are “Wall Street insiders” when they actually are not. 

Karatbars products – cards and CashGold

Now, let’s talk about their products. First, their Mini Gold Bar Cards, start from one gram of pure gold embedded in the card. Second, their CashGold is banknote-like paper with tiny gold bars embedded (.1 g of gold). These mini gold pieces are sold at 20-30% higher price than the same quantity of gold elsewhere. Therefore, the premium makes it a much more impractical starting point as an investment; however, some argue that the smaller quantities of gold make it more accessible and practical if the monetary system collapses and if fiat money disappears. Overpriced or not, it is not a “scam” in the purest sense of the word because you receive a real product after paying for it.

Karatbars’ free affiliate program

They have two “business opportunities” in which people can participate. First, you can open up a free account to participate in their affiliate program. It is a “business opportunity” in which you sell Karatbars products for a small commission. However, the products are expensive and the commission is very low, making this very difficult to succeed using the affiliate program. This seems to be a free alternative to their real paid objective, which is to build a team. We will touch more on this second “business objective” later. 

Up until now, everything seems legit and checks out. However, during our research, we did encounter many red flags, which we will explain now. 

Red flag #1 – MLM structure

Their business model is selling products through Multi Level Marketing (MLM), even before cryptocurrency became apart of it. In our opinion, any company that has crypto and MLM should definitely be further investigated. This is based upon history and the number of companies with similar business models that have exited or collapsed. Because of this, Karatbars International tries to downplay the MLM structure and makes it really convoluted and difficult to learn about how it works. However, their compensation plan includes building a team by recruiting people, who then recruit more people, and in doing so, they receive different bonus levels. This is very typical of Multi Level Marketing. 

It is also important to discuss their pre-crypto phase packages. As stated before, the free affiliate program is only a method of getting people to participate in the real “business opportunity.” In order to participate in it, they need to “pay to play,” which is a very visible pyramid scheme. There were four different packages (bronze, silver, gold, and VIP), where 10% of what you pay is real product value and 90% of investment is for the privilege to recruit new members and get higher commissions. 

Red flag #2 – Regulator warnings

Karatbars International has also received multiple warnings from regulators as well as court convictions. In 2014, the Canadian financial Authority, AMF, issued a public warning about Karatbars International. In 2016, Karatbars was convicted in a court trial by the AMF and the company and 2 promoters were fined. The Dutch financial authority, AFM, also issued a warning to the public about Karatbars. Finally, the Bank of Namibia labeled Karatbars a pyramid scheme (illegal in Namibia) in 2019. 

Red flag #3 – Non-existent crypto bank

In a Medium article in June 2018, Karatbars announced the “world’s first fully-licensed cryptocurrency bank”, named KC Bank to be opened in July 2018 in Miami, Fl. This crypto bank is also mentioned and included in their white paper. However, it has been almost a year since its announcement, and it has yet to be created. In recent material, they are still talking about the bank project which is now due in September/October 2019, but we have no evidence of that actually happening.

Now, we must touch on their foray into crypto. Initially, they created the KaratBank Coin, but they later renamed it to KaratGold Coin (ticker KBC). It’s an ERC20 token on Ethereum with a white-paper promise of its own mainnet in the future. The ICO for KBC was offered to the existing MLM affiliates in 2018; however, ICO affiliate commissions were oddly only 1 level deep. 12 billion KBC were issued with the promise of gold backing for them, but the issuer of KBC and operating the KBC ecosystem is a separate entity called Karatbit Foundation, which is located in Belize. Karatbars International, which sells the gold products, and Karatbit Foundation, which sells and operates the KBC coin, are separate entities. Also, Karatbit is not regulated so it may be difficult to legally enforce the gold backing. 

Red flag #4 – Contradictory white-paper claims

The WP begins with 2 bold claims about KBC. First, they say that KBC is backed by actual, safely stored gold, and second, they say that the price can never plummet. Also, they say that a certain amount of KBC can be exchanged for a certain amount of CashGold. Later on, the white-paper says that KBC involves high level of risk, it is not tied to the purchase of CashGold, the value of KBC is not related to CashGold, and a total loss of money invested in KBC can’t be excluded. Which claims are true? The extravagant claims in the beginning or their more tempered claims at the end?

Red flag #5 – Blatant price predictions

In their white-paper, they make blatant price predictions which is always super shady. They say the “value is expected to rise sharply” and “forecasts predict a further increase up to $10 per coin.” However, KBC is still valued at less than $.05 per coin. Besides its gold backed claims being contradictory, they also state the KBC has nothing to do with any company, shared profits, dividends, or interests. Without any gold backing, is it just a worthless ERC20 token?

Red flag #6 – Deceptive “Binance listing”

They also publicized a very deceptive claim about their Binance “listing”, making people think that their coin was tradable on Binance. However, KBC was not being traded on Binance, rather it was simply listed on the Binance info page, which offers information about various projects, regardless of whether or not they are being traded on Binance. KBC can only be traded on a variety of shady exchanges, most notably HitBTC.

Red flag #7 – Non-existent mainnet 

They promised a “revolutionary” KBC protocol (KBC mainnet) to be released in early 2019; however, it is now promised for September 2019. Furthermore, the white-paper does not explain anything about the protocol or about why it is “revolutionary.” Also, the low amount of Github does not spark any confidence that anything is actually being developed. 

Red flag #8 – Botched Gold independence day event

The team also seriously botched their heavily hyped 4th of July Gold Independence Day event. They made an announcement that 100 KBC would be exchangeable for 1 gram of gold. However, on that day, nobody was actually able to make the exchange. A few days later, Josip Heid, and executive of the company, back tracked and said that the exchange could only be done with Karatbars’ soon-to-be-launched gold ATM’s and that KYC would be necessary to combat scammers. After that, CEO Heiz announced that KBC would have “no business” until October. 

Before the Gold Day debacle, the KBC price rose; however, after, the price of KBC crashed heavily. On July 3, 2019, KBC was priced at about $.12, but after the failed Gold Day, it rapidly declined to a low of $.02. For perspective, 1 gram of gold (spot price) would be $45, which means at the highest KBC price of $.12, KBC holders should receive $45 worth of gold for $12 worth of KBC. However, the CEO has not kept his promise yet, and we have no reason to believe it would be fiscally possible to keep it. Furthermore, the price drop seems to reflect that investors don’t have confidence that the token is backed by gold or that the promise will be honored. 

Red flag #9 – Mysterious KCB coin

Finally, there is a mysterious second coin in this ecosystem that we do not know much about. Now in the business packages, investors also receive a second coin called KCB, but the function and difference to KBC is unclear. KCB is not listed so the price is whatever the company says it is, and they continue the claim of “gold backing.” During the future mainnet launch, KBC and KCB are supposed to be “forked” into one new coin. 

More bold claims made about their mainnet launch are that they will distribute CashGold ATMs all over the world, release a blockchain based smartphone, launch the KC Bank, and according to the announcements, all of this will happen in September. However, we are very skeptical about all the delays and promises for many reasons as you can tell. 

Final thoughts

In conclusion, we are very suspicious of Karatbars International and the KaratGold Coin. Due to the major red flags, MLM, price predictions, lack of Github development, breach of confidence after Gold Independence Day with regards to the already contradicting “gold backing”, and all the “too good to be true” claims. We would be very surprised if it were not a scammers operation. However, our own opinion is only based on the information we reviewed, so everyone has the right to come to their own conclusion. Nevertheless, we have near 0 confidence in this company/coin being able to keep their promises. 

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