A growing list of cryptocurrency-themed projects have turned out to be complete scams. Although there are some exceptions, most of those ventures are no longer around. In the case of Karatbars, it seems things have begun to unravel in quick succession. The project is under investigation for a variety of reasons. 

Karatbars and its Gold Reserves

Regulators in the US have taken offense to the Karatbars project. Not just because of its upcoming crypto bank venture, but also because there are a lot of factors which simply do not add up. The company behind this venture raised $100m through an initial coin offering in 2018. Investors assumed they were buying into a cryptocurrency which is backed by actual gold reserves.

This is where the first problems have arisen. To this date, no one has been able to verify the company has any gold reserve in the slightest. Furthermore, the initial coin offering was organized without an official license, and the company doesn’t own a banking license either despite claiming the token is tied to their own crypto bank in Miami. A lot of red flags which investors have noted back in 2018, yet which seemingly went by unnoticed.

The Second Token Sale

To make matters even more interesting, the Karatbars venture confirmed it would try to raise additional funds with a completely separate token later this year. Why that money would be needed, is rather unclear. To date, the project has not delivered on any of its initial promises. Launching this crypto bank in Miami will also not go according to plan without the necessary regulatory approval. That approval will seemingly never come either, as Florida regulators have not taken kindly to these bold claims.

The bigger question is what happened to all of the money raised during the 2018 initial coin offering. As there is no traceable supply of gold reserves, the tokens are inherently worthless until proven otherwise. Additionally, the company had already been contested prior to this ICO. It has been around since 2011, yet received negative responses from officials in various countries since then. 

Should Investors be Concerned?

While these red flags are an obvious sign of concern, there is still a chance the Karatbars team can refute any allegations without too many problems. The gold reserves are easy enough to prove. The plans to run a crypto bank in Miami may have been premature, albeit that cannot be an excuse for potentially deceiving investors. 

Karatbars, or KBC as it is known on exchanges, can be traded on over two dozen exchanges at this time. Investors who are concerned regarding the project may want to liquidate some assets and recover most of their investment. However, doing so would also mean these users could miss out on a price spike if that ever were to happen. It is a very tough decision to make, especially given the lack of any real evidence to make the company more legitimate.