The US Securities and Exchange Commission (SEC) filed charges against another initial coin offering (ICO) last week, arguing that AriseBank not only violated securities regulations but also made false statements to investors.
The charges, which the SEC filed against the Texas-based AriseBank on Jan. 25, allege that the firm and its co-founders, Jared Rice Sr. and Stanley Ford, sold unregistered securities and engaged in “fraudulent conduct” to market its “decentralized bank.”
“The SEC alleges that AriseBank falsely stated that it purchased an FDIC-insured bank which enabled it to offer customers FDIC-insured accounts and that it also offered customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies”, the SEC said in a statement. “AriseBank also allegedly omitted to disclose the criminal background of key executives.”
The SEC’s suit against AriseBank was followed the next day by a cease-and-desist order issued by the Texas Department of Banking.
Press releases published by the firm indicated that the ICO had raised at least $600 million of a $1 billion target, although there are ample reasons to be skeptical of that claim.
Perhaps due to the gravity of investors’ potential losses, the SEC took its actions against AriseBank a step further than it had in previous cases, appointing a receiver to take custody of the digital assets held by the company
“This is the first time the Commission has sought the appointment of a receiver in connection with an ICO fraud. We will use all of our tools and remedies to protect investors from those who engage in fraudulent conduct in the emerging digital securities marketplace”, said Steven Peikin, Co-Director of the SEC’s Enforcement Division.
Notably, the AriseBank ICO had been endorsed by boxing legend Evander Holyfield, once again raising questions about whether celebrity ICO promoters could be charged in connection with suits against ICO operators.
Last year, the SEC said that such endorsements were “potentially unlawful”, but this may the first case in which a celebrity endorsed an ICO against which the SEC later filed a suit.
Significantly, the SEC’s charges against AriseBank were filed one day after SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo wrote an op-ed chastising many ICO industry participants for nakedly violating federal securities regulations and investor protection rules.
