SEC Files Fraud Charges on Texas-Based AriseBank, Halts $1 Billion ICO
Yet another case of fraudulent ICO has recently come to surface as the U.S Securities and Exchange Commission (SEC) has slapped the Texas-based AriseBank with fraud charges. The SEC has roped-in AriseBank co-founders Jared Rice Sr. and Stanley Ford who have been charged for an alleged fraud and issuing of unregistered cryptocurrencies during their latest Initial Coin Offering (ICO).
The Dallas-based AriseBank that claimed itself to be “the world’s first decentralized cryptocurrency bank” has been slapped by the cease and deceit order by the Texas State's Department of Banking and has been asked to immediately stop its ICO proceedings. The bank was planning to raise $1 billion from thousands of investors.
The SEC has asked the bank to refund the investor proceeds in a report which states that “it used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months.”
AriseBank called itself a cryptocurrency banking firm which claimed to provide several banking products relating to cryptocurrency. AriseBank planned to raise over $1 billion through private and public sales of its own digital tokens known as AriseCoin.
In an official press release on Friday, Jan. 26, the Texas Department of Banking says that the cryptocurrency bank’s business does not offer any “banking services” in reality. The press release states: “The Cease & Desist Order was based on the Commissioner’s finding that AriseBank violated Texas Finance Code Chapter 31 by using the term “bank” in its name and marketing materials to imply that it is in the business of banking in this state.”
It further adds that “The order requires AriseBank to cease and desist from implying that they engage in the business of banking in Texas. AriseBank is further required to clearly disclose that they do not offer their services to consumers in Texas.”
The SEC has alleged AriseBank of violating security regulations and says that neither the firm ‘AriseBank’ nor its digital coin ‘AriseCoin’ has been registered with the agency. The SEC has also alleged the “cryptocurrency bank” to have falsely claimed about signing an agreement for two FDIC-insured banks, TPMG and KFMC Bank Holding Company.
The SEC says that neither of the two banks which were supposedly purchased was insured by FDIC. FDIC - Federal Deposit Insurance Corporation is a federal agency which insures overseas financial institutions for consumer protection.
The SEC stated that “Because of the ongoing nature of the fraudulent offering and risk of asset dissipation, the SEC seeks emergency relief – including temporary restraining orders, asset freezes, and the appointment of a receiver over AriseBank."