Gyroscopic Investing

About a year and a half ago I was eating at Denny's restaurant with some friends. Aside from talking about typical millennial topics such as yoga, kale smoothies, and snapchat, we discussed cryptocurrencies at length. A fellow a few tables over happened to overhear our conversation. He piped up and said "You guys are interested in cryptocurrencies, eh?" We nodded and he proceeded to chat us up.

He introduced us to a "revolutionary" cryptocurrency called KaratGold Coin (KBC) that promised all of the benefits of gold and cryptocurrencies married into a single platform. The founder, Harald Seiz, pledged to act essentially as a central bank as this alleged billionaire would backstop the coin and peg the new cryptocurrency to gold at a specified rate. The current coin price was much lower relative to this promised rate. Essentially an arbitrage opportunity! As you can imagine, this already wasn't smelling right to me.

"The best part is that new coins are mined in a unique way! Instead of setting up mining rigs like with Bitcoin, you are rewarded coins when you recruit people to join!"



At this point it's pretty obvious that this is MLM at best and a Ponzi or actual pyramid scheme at worst. I politely declined.

Today the incident popped into my head and I decided to check out how KaratGold Coin (KBC) has progressed. Welp, turns out it wasn't just another coin tossed into the trash heap of cryptohistory. Rather, it really WAS a Ponzi scheme as it turns out Harald Seiz was simply taking all the investor dollars and spending it on his own lavish lifestyle. All the talk about gold backing and pegging was an outright lie. The various websites attached to the coin such as this one and this one are no longer operating. Furthermore, regulators are hammering down and telling the issuing company to cease operations. The coins are essentially worthless and the jig is pretty much up for Harald Seiz.

Here's a look at the KBC price chart.


P.S. One cool thing about the guy's impromptu presentation was the physical gold note he showed me in the middle of it. It looked like a normal banknote but it had (supposedly) 0.1 grams of gold embedded in the middle of it like a kind of foil or seal. That was actually legit cool.

Of all the cryptos, only Bitcoin really has my trust, and only for a single-digit percentage of my variable portfolio. There are interesting coins out there, like Monero, which is 100% focused on privacy. But that's really it (for me, at least). You were wise to decline the offers of this guy.

But didn’t it promise more transactions and clean energy! /s

Smith, that episode tells me you're still in the young/discovering the world phase....

Scams like this are part of life and they are to be found everywhere. Out of all the "red flags" I use to detect them, definitely a guy jumping over to your table at a restaurant to tell you about some shiny new thing he's selling is way up near the top.

Glad you were able to avoid it, and hopefully the many others you must have encountered so far!

sophie wrote: ↑Wed Jul 08, 2020 10:28 am Smith, that episode tells me you're still in the young/discovering the world phase....

Or the old/forgetting the world phase...

sophie wrote: ↑Wed Jul 08, 2020 10:28 am Smith, that episode tells me you're still in the young/discovering the world phase....

Scams like this are part of life and they are to be found everywhere. Out of all the "red flags" I use to detect them, definitely a guy jumping over to your table at a restaurant to tell you about some shiny new thing he's selling is way up near the top.

Glad you were able to avoid it, and hopefully the many others you must have encountered so far!

Overall I don't think I've made too many super egregious errors when it comes to scams or dubious financial schemes. I'd say my worst offence was attempting to day trade penny stocks when I opened my first brokerage account. That would have been about a decade ago now. I had the princely sum of $6,000 to trade and lost half of it in the course of one morning. I remember the dejected feeling I had. I took the remaining $3,000 or so and put it into Apple. Within a year the price doubled and I had recovered my original investment. (I think part of the doubling was due to FX fluctuation, now that I think about it.) I closed the account and didn't touch stocks again for probably another year because the experience was so harrowing.

Good times.

Smith1776 wrote: ↑Wed Jul 08, 2020 2:12 am About a year and a half ago I was eating at Denny's restaurant with some friends. Aside from talking about typical millennial topics such as yoga, kale smoothies, and snapchat

I KNEW it! Freakin snowflakes.

The Karat Gold guy exuded fraud in his videos.

One of my Facebook friends is still in the scheme and refuses to see it for what it obviously is.