The FSCA said it was informed that Karatbars International GmbH had been offering investments to customers via WhatsApp. Photo: Supplied

CAPE TOWN – The Financial Sector Conduct Authority (FSCA) on Monday warned the public not to deal with an entity called Karatbars International GmbH.

“Karatbars International GmbH is not authorised in terms of the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act), to render any financial advice and intermediary services,” the FSCA said in a statement on Monday.

The FSCA said it was informed that Karatbars International GmbH had been offering investments to customers via WhatsApp. Karatbars International GmbH is based in Germany and is not authorised to render financial advice and intermediary services in South Africa.

Karatbars uses a multi-level marketing (MLM) system, although it prefers to describe itself as an an e-commerce company with an affiliate programme.

MLM, also called pyramid selling, network marketing, and referral marketing, is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.

Coindesk reported that Karatbars was under investigation, saying the wheel of justice rolls very slowly but when it does work properly, then it can be very thorough.

“Be careful with investing your money in this, you’d be much better off simply buying gold bullion and holding on to it … Some people are successful in them and some are not,” reads the report by Coindesk.

Karatbars offers several different options for those who want to sell Karatbars. The affiliate accounts are the bronze, silver, gold, and VIP packages.

Initial startup costs range from $135 (about R2 000) to $2 100. Commissions are determined on the size of package selected and range from 5 percent to 20 percent.

The FSCA reminded consumers who wished to conduct financial services with an institution or person to check beforehand with the FSCA as to whether or not such institution or person was authorised to render financial services and the type of services which they were registered to perform.

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