Karatbars International banned in Canada, pyramid scammers fined
Karatbars International are one of the pioneers of the gold recruitment MLM business model.
Under the guise of purchasing gold, Karatbars’ business model sees affiliates pay a fee and are then paid to recruit others who pay a fee.
In 2014 Canadian regulator Autorité des marchés financiers (AMF) issued a warning against Karatbars.
The warning was reinforced with legal action, which has been playing out over these past two years.
The AMF’s initial warning against Karatbars was issued on March 20th, 2014.
On April 8th the AMF sought an ex-parte injunction against Karatbars International, Robert Lariviere, Michel Desroches, Antoni Snopek and Michel Galipeau.
The AMF initially sought a ban on the promotion of Karatbars International in Canada, as well as administrative fines of $30,000 for the company and $5000 each for the named defendant affiliates.
A hearing was held on April 9th and a decision reached on April 17th.
The court rejected AMF’s claims against Michel Galipeau but granted an injunction against Karatbars and the remaining three defendants.
The decision was appealed in May, with hearing scheduled a year later around May of 2015.
Settlement negotiations continued between Karatbars and the AMF throughout 2015, which saw the hearing postponed until November, 2015.
On November 6th the AMF filed a revised complaint, which was followed up with a hearing on November 9th.
This hearing saw motions to dismiss from the defendants denied. The case continued and subsequent hearings were held on in February, 2016.
Nine months later on November 4th, 2016, the court reached a decision and ruled in favor of the AMF.
The court ordered the operation and promotion Karatbars International prohibited in Canada, as per the Financial Market Authority Act and Securities Act.
Robert Lariviere, Michel Desroches, Antoni Snopek were ordered to cease promoting Karatbars and fined $500 CAD each ($373 USD).
Karatbars International itself was fined $3000 CAD ($2242 USD).
The administrative fines were issued for promotion of the Karatbars pyramid scheme, in violation of the Canadian Securities Act.
The court found Karatbars and its affiliates were offering “investment contracts”, which it was not authorized to do so because Karatbars was not registered with the AMF.
A full copy of the Canadian court decision against Karatbars International was provided courtesy of BehindMLM reader “Daniel” (first Dropbox link in his comment).
Wow a $3000 fine. That will really make Karatbars see the light and change their model 😛
I think it was an effort to get anything. Karatbars doesn’t have an official presence in Canada after all.
This is simply not what happened. The court ruled in favour of Karatbars in all but one count – on a certain “World Pool” bonus, which the company had since 2 years ago did away with anyway.
The product was deemed able to be sold (i.e. gold) and the court said it was no different than other gold companies (including the CDN Mint.
The MLM sales process was deemed legit as most decent MLM sales processes are and always have been.
The compensation model was deemed legit (except for the “World Pool” bonus, which has since been disbanded)
The price for the starter kit was deemed legit as it was for sales tools which are optional (i.e. Karatbars also allows people to become reps for $0)
All you have to do is read the court verdict yourself. The case can be read here: canlii.org/fr/qc/qctmf/doc/2016/2016qctmf35/2016qctmf35.html
English translation here: translate.google.ca/translate?sl=fr&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.canlii.org%2Ffr%2Fqc%2Fqctmf%2Fdoc%2F2016%2F2016qctmf35%2F2016qctmf35.html&edit-text=
I think Behind MLM needs to print a retraction and quickly.
What do you mean “this is not what happened”?
The AMF sued Karatbars International for being a pyramid scheme. The court banned Karatbars International, fined the company and three named affiliate defendants.
It’s right there in the order of the court document you yourself linked. What do you think this entire article is based on?
Ummm…Oz, please read carefully. As I pointed out, this ONLY has to do with the “World Pool” bonus. All ceasing has to do only with regard to the World Pool bonus and with this bonus only. This particular bonus has not been in effect for several years.
The court decided categorically that Karatbars was NOT a pyramid scheme and all the other accusations by AMF were proven by a court of law to be unfounded.
The judge only sided with the AMF “IN PART” as is clearly shown from the English abstract below taken from the court verdict. They grant AMF a win on the world pool bonus & Karatbars a win on all other matters.
For promoting the WORLD BONUS the 3 defendants & Karatbars got a slap on the wrist, which is appropriate since it amounted to nothing anyway. Karatbars wins on all other matters.
Check it out below – I have put in upper case where it refers to the WORLD BONUS only and specifically limits the AMF’s “win” to just this one single item:
You can call it whatever you want, Karatbars affiliates pay a monthly fee and get paid to recruit new affiliates. There’s no retail, making it a pyramid scheme.
The take-away is the court banned Karatbars International in Canada and fined the named affiliate defendants. You can’t spin that.
Yeah, except that’s not in the November 4th order. The court granted the AMF an injunction back in 2014, refused to dismiss the case (or lift the injunction) in 2015 and ultimately ruled in favor of the AMF in 2016.
That’s in the order for anyone to read.
Hi Oz, you are not listening, reading, or understanding. The court ruling found that Karatbars & the 3 named affiliates ONLY erred in the World Pool Bonus part of the structure, which has to do with recruiting reps & which has not been in place for several years now, so the courts found that Karatbars is 100% legit & not an illegal pyramid scheme.
I have been advised by Sylvain Theberge of the AFM that they too agree & that they will be printing an update in their newsletter to reflect the court verdict.
If the AMF agree with me and the court, then why don’t you?
I read the official court order, which details the history of the AMF suing Karatbars. It then bans Karatbars in Canada and fined the company and three affiliate defendants.
“100% legit not an illegal pyramid scheme” companies don’t get banned and fined by courts.
Hi Oz,
Okay, let’s start over.
(Ozedit: Let’s not. The order is clear and available for anyone to read. Please stop wasting my time.)
If anything further happens with respect to the AMF, by all means leave a comment with verifiable information.
Otherwise the facts are as they stand:
-AMF sued Karatbars International
-A Canadian court ruled in favor of the AMF, banned Karatbars International and fined the company and three affiliates
I’m not interested in reading scam spin on the ruling. It is what it is and anything that extends beyond the ruling itself is speculation on the part of Canadian Karatbars affiliates.
As per BehindMLM’s own Karatbars review, it’s a typical Euro gold pyramid scheme. You sign up, pay fees and get paid to recruit others who do the same. You can’t legitimize pyramid schemes.
Sigh…
Oz, I am showing you what the court verdict said. (Ozedit: Snip, the order is what matters.)
You can argue the semantics of investment contracts under Canadian law somewhere else. The facts are otherwise as they stand.
Karatbars has little to no retail activity and pays affiliates to recruit new affiliates, making it a pyramid scheme.
The November 4th court order, as detailed in this article, is self-explanatory.
(Ozedit: See comment #10)
i think i see what steve here is trying to say.
the canadian administrative court has found the karatbars ‘world pool’ to be an investment contract and has banned this part of the program.
however, the court found that the rest of the karatbars program wherein affiliates bought ‘packages’ containing gold, discount cards and brochures, were not an ‘investment contract’ [securities] under howeys test.
the AMF apparently tried to label karatbars scheme as an investment contract, which the court did not agree with.
this case was not about ‘pyramid’ scheme or retail customers. i think the AMF picked the Wrong Gun [securities] to try to shoot karatbars with.
the court found that:
– the packages had commensurate value and were thus not an ‘investment’.
– affiliates earnings were a result of their own efforts thus howeys ‘efforts of others’ prong was not met
– the affiliates sales work was not minimal and affected the success or failure of karatbars as a whole
thus, the AMF’s contention that karatbars was selling ‘unregistered securities’ was shot down by the court except for the ‘world pool’ which the court found to be a security.
hence the world pool was banned and a small fine was levied on the promoters.
pretty interesting decision. binary plans often attract ‘securities’ labels because of the easy work of ‘get two who get two’, but in this case the court has taken a different decision.
we have seen that when it comes to howey’s test and MLM, different courts come to different conclusions, and karatbars has found a sympathetic court.
Fact remains though: Karatbars was banned in Canada and fined, along with three affiliate defendants.
Whatever the World Pool thing was it must have been pretty lucrative (looks like Ponzi points to me from a quick Google search), as Karatbars quickly got rid of it after the AMF went after it.
Advertising for the World Pool seems to have stopped late last year.
Karatbars itself has been dead in Canada ever since. With the AMF watching, you’d have to pretty stupid to continue to promote it there IMO.
Won’t take much to file another lawsuit alleging pyramid fraud. But no point if the scam has already been stopped dead in its tracks locally.
And by no means does any of this clear Karatbars legally or constitute a “win” for the company. Court orders are very specific and address the issue(s) before the court. You cannot read into them and draw conclusions on matter not before the court in that specific case.
That’s directed more at Karatbars affiliates than you anjali.
$3000 fine is an invitation to other Pyramid scheme to come to Canada. Collect truck load of money and get fined $3000. Crazy
Securities laws and enforcement agencies are different within each canadian province. Quebec in this case lacks the adequate enforcement, it is a scammer’s paradise
and with that they launch a new product,
Karatbars CEO Harald Seiz: „With CASHGOLD, you hold a global NOVELTY in your hands that uniquely unites the reliable value of gold with the advantages of a modern payment method.
just like all the new coin scams going, yet they still want your real currency, be it dollars, euros, pound or whatever. good luck with taking this and buying your groceries with.
Actually, it is much more convenient to have gold in a transaction friendly form like the cashgold product or the cards rather than loose pieces of gold.
And yes, it is possible to use these products as direct payment for goods and services offered by various companies who have partnered with Karatbars as K Exchange centres.
Try to find a K Exchange center in your area. Lot’s of talk but I can’t even find a place anywhere to cash in.
Useless pyramid scheme where you over pay for the price of gold and the buy back is far less then what you paid. It just looks good on paper until you want to cash in.
I tried and it’s not possible or at least not for what my port folio shows I’ve earned with them.
I was told I could cash in dollar for dollar of the gains they show I’ve earned. Not true and not possible!
Don’t believe the lie they tell you! I did and now I’m screwed!
Legal Eagle,
Your comments are clearly false. Visit here to do a custom search for K exchange: karatbars.com/k-exchange/index.php?page=search&search_type=location
I did one for a 500km radius for my address in Montreal and found four results.
Do your proper research before getting on the fear-mongering train.
I buy gold and got involved BC I bought some gold from a Karatbars Affiliate.
I have invested over 100K and got friends, family and business associates involved with the promise of 75 KBC’s for a gram of Gold. Which is a fantastic return.
I bought a CEM (ATM) machine for 15K plush cashgold for 5K. My Jewerly store was to be the hub for my affiliates to cash in on cashgold promised by Karatbars.
HOWEVER Karatbars is doing everything in its power to keep from honoring this promise.
They have added many gimmicks making it all but impossible to use the CEM machine. I can not get anyone at Karatbars to answer any emails or corporate in any way to become qualified to have the ability to get the gold they promised.
I believe (based on the position I am in ) that I have fell into a den of Thieves.
Mr Harold is always saying how he is helping his people, I strongly disagree and would welcome an opportunity to confront him air any one in his organization.
If someone can tell me I am wrong it would be a relief. But there are a lot of people that are fooled by Karatbars and being used for pawns to further the few at the top who I believe are extorting everyone else.
THIS STATEMENT IS AN OPEN Challenge TO KARATBARS OR ANY Affiliate OF KARATBARS TO HEAR THE TRUTH.
Sadly, you are not wrong. MLMers are scammers, and you became one too – albeit apparently unwittingly. Now you know.
The take away. The MLM method is the scam regardless of the product. The only thing you need to hear from Karatbars is if they were an MLM company aka an endless-chain recruiting company. We already know that answer.
I write this comment to protect future people such as yourself if they are reading this. Had you avoided MLM, you wouldn’t have joined Karatbars. Easy peasy.
Don’t let egos and analysis of the cover product trip you up. It’s a tactic scammers use.
Karatbars is definitely a scam. They do not care about their affiliates. Their customer service was horrible as well.
There are a handful of very wealthy, high-profile people wandering around Vancouver, Canada, who have defrauded Many people locally.
They knew Karatbars was banned and were still taking people’s money, holding meetings.
They have since wiped Karatbars off their online profiles. There is no information about Karatbars anywhere.
Is there any way their victims can find each other to organize some kind of lawsuit??
Sure, through a lawyer.
the problem is that many of us cannot afford a lawyer to get it started. I know I can’t. If I had the money and could find a trustworthy lawyer, I wouldn’t be on this forum.
That is why feedback on any possibility of finding other victims would be helpful as we could share the expense.
Or — how do I find a lawyer that is willing to take the case pro bono in the beginning??
That would be helpful feedback..
I get your position but BehindMLM isn’t a substitute for legal advice.
As for finding a lawyer, you’ll need to contact them directly.
I am not asking for legal advice, Oz. I will get that from a real lawyer.
What would be helpful is advice on how to find a lawyer willing to take it on..
Google. Same way anyone finds a lawyer (???).
You’re not going to find a lawyer willing to take on your specific case without contacting lawyers.
I know you’re looking for a passive “click button –> class-action” solution but that doesn’t exist.