Company in murky waters

The brevity of the few standard paragraphs the Financial Sector Conduct Authority (FSCA) issued to warn the public against doing business with Karatbars International belies its importance. In fact, the warning can apply to all the agents and representatives currently marketing Karatbars products – if the products are marketed as investments.

Neither Karatbars International GmbH or a local office of the company, nor any of its representatives, are registered to sell financial products in SA or offer financial advice to the public. Any agent or representative will need to register with the FSCA.

Brandon Topham, divisional executive for investigation and enforcement at the FSCA, says Karatbars and its agents are prohibited from selling or promoting investments which fall within the definition of a financial product.

“Questions exist as to whether or not this is the case,” he says. “We await further information from the company.”

Topham adds that the FSCA did not receive any additional information from Karatbars as claimed by its legal representatives in media reports following the publication of the warning by the financial services watchdog.

The Bank of Namibia investigated Karatbars and concluded that it is nothing more than a pyramid scheme that preys on vulnerable people.

“Members’ income is based on the successful recruitment of new participants to purchase new gold embedded cards for which money is accepted as a regular feature of joining the business,” reads part of the bank’s statement issued in May, when it banned Karatbars.

In the Netherlands, financial authorities warned people against investing in a Karatbars gold investment product that also promised investors in gold bars that Karatbars would store their gold safely.

Its cryptocurrency is close to worthless despite the promises that it is backed by gold.