Former Executives Fined $2.7 Million over ICO Scam Charges

AriseBank claimed to be the world’s first decentralized bank.

A federal court has ordered two former executives behind an allegedly fraudulent initial coin offering (ICO) to pay nearly $2.7 million and prohibited them from serving as officers or directors of public companies, or participating in future offerings of digital securities.

Jared Rice Sr., former CEO of Dallas-based AriseBank, which claimed to be the world’s first “decentralized bank,” and former Chief Operating Officer Stanley Ford were accused of offering and selling unregistered investments.

“Rice and Ford lied to AriseBank’s investors by pitching the company as a first-of-its kind decentralized bank offering its own cryptocurrency for customer products and services,” Shamoil Shipchandler, director of the SEC’s Fort Worth Regional Office, said in a release.  “The officer-and-director bar and digital securities offering bar will prevent Rice and Ford from engaging in another cryptoasset-based fraud.”

According to the SEC charges, AriseBank used social media, a celebrity endorsement, and other dissemination tactics to raise what it claimed to be $600 million of its $1 billion goal in just two months.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Rice and Ford allegedly offered and sold unregistered investments in their purported “AriseCoin” cryptocurrency by offering a various banking products and services using more than 700 different virtual currencies. The SEC said AriseBank’s sales pitch claimed that it developed an algorithmic trading application that automatically trades in multiple cryptocurrencies.

The SEC also accused the company of falsely stating that it purchased an FDIC-insured bank, which allowed it to offer customers FDIC-insured accounts, and the ability to obtain an AriseBank-branded Visa credit card to spend any of the cryptocurrencies.  AriseBank also allegedly omitted to disclose the criminal background of key executives.

To settle the charges, Rice and Ford agreed to be held jointly liable for more than $2.2 million in disgorgement, more than $68,000 in prejudgment interest, and each must pay a penalty of nearly $185,000.  They also agreed to lifetime bans from serving as officers and directors of public companies, and from participating in digital securities offerings. 

Although Rice and Ford agreed to the settlements, they did so without admitting or denying the allegations in the SEC’s complaint.

Tags: , , ,

«