The German Federal Financial Supervisory Authority (BaFin) has issued a cease and desist order to Karatbit Foundation to immediately stop unauthorized business in Germany.

BaFin alleges that Karatbit Foundation is issuing the KaratGoldCoin (KBC) without the necessary license, according to a Nov. 11 announcement.

Karatbit describes itself as a provider of a blockchain-based payment system that enables users to conduct transactions with gold, as well as trade gold with cryptocurrencies. The company claims that over 500,000 acceptance points around the world and ten crypto exchanges support trading of gold and gold products for KBC.

Absence of the necessary licence and launched investigations

In the announcement, BaFin said that Karatbit conducted business in Germany without the necessary license. However, the regulator pointed out that although the order was effective immediately, it may still be subject to judicial review.

As The Guardian reported on Nov. 13, the public prosecutor in Stuttgart had also initiated investigations into the company’s activities. In response to the allegations, Karatbars told the Guardian that no investigations into KBC had begun and ensured that “no customer or partner has ever incurred losses due to Karatbars and its products.”

Karatbars further argued that those German customers holding KBC received it as “only a free bonus gift that came with other Karatbars products,” and that BaFin’s ruling was based on a fake Karatbars website.

Contradicting share in a gold mine

To guarantee the stability of its tokens, Karatbars claims that it owns a share in a gold mine located in Madagascar that purportedly contains 900 million euros ($990 million) worth of the precious metal. Moreover, the company’s founder, Harald Seiz, said that the company had secured $100 million through sales of KBC.

In contradictory figures, the company specifically asserted in its white paper that “the gold mine in Madagascar having 900 billion euros was bought.” Seiz also reportedly failed to prove his ownership of a stake in the gold mine.

Moreover, Karatbars used former football stars Lothar Mattäus, Roberto Carlos and Patrick Kluivert’s images without their permission to promote its products. Kluivert and Matthäus denied their relation with the project.