German regulator BaFin shuts down KaratGold Coin

Karatbit, a company claiming to offer the sale of gold-backed tokens in Germany, has been issued with a cease and desist order from BaFin 

The Karatbit Foundation has been forced to cease trading after the German financial regulator BaFin claimed that the company has been issuing tokens without a licence.

German cryptocurrency company Karatbit, which according to an official statement from BaFin has its offices in Belize, issued a token called ‘KaratGold Coin’, which company officials claimed was backed by $900 million worth of physical gold.

The company enlisted the help of former footballers Lothar Matthäus, Patrick Kluivert, and Roberto Carlos to promote the sale of its tokens.

Harald Seiz, who founded the company in 2011, has reportedly made around $100 million by selling KaratGold Coin. However, the company has since been accused of being an elaborate pyramid scheme.

Karatbit attracts affiliates who then sign up other affiliates and are offered a commission in return. Speaking at official Karatbit events, Seiz has claimed affiliates can earn Lamborghinis and other luxury items through the scheme.

However, regulators have now cracked down on Karatbit, claiming it was promoting a pyramid scheme and selling unlicensed assets.

Backed by gold

The principal selling point of KaratGold Coin is its supposed peg to real, physical gold.

Allegedly, Karatbit has access to and a significant stake in a gold mine in Madagascar, which was secured to maintain KaratGold Coin’s value.

However, according to official mining data, the mine contains titanium and zircon with no gold deposits.

According to a report in the Guardian, a Swiss geologist – who produced a report on the contents of copper mines in Chile – claims Karatbit used and manipulated her report for its own marketing materials, and has since launched a lawsuit against the company.

Cease and desist order

German newspaper Handelsblatt reported on Tuesday that BaFin had instructed the Karabit Foundation to settle its outstanding claims and to cease and desist all further sales of KaratGold Coin in the country.

BaFin referred to the company as an “unauthorised electronic money business” and cited the lack of necessary licences as a reason for the decision.

Seiz denies that Karatbit has been involved with any wrongdoing, stating that there is no cause for concern and regulators are simply trying to “get in the way of Karatbit’s success”.

Gold-backed stablecoins are finding success among crypto-enthusiasts and traditional traders, with huge trading platforms like eToro now offering digital gold alternatives. However, it’s important to verify that the company holds the underlying asset in escrow.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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