AriseBank in Dallas is Accused of Alleged $600M ICO Offering Fraud

The SEC has put a stop to Dallas-based AriseBank’s initial coin offering. The regulator contends that AriseBank, which touts itself as the first “decentralized bank” in the world, and its principals are committing Texas financial fraud, and they’ve targeted retail investors, including Texas investors, in an effort to raise hundreds of millions of dollars.

Now, the Commission has a court order to stop the sale of AriseCoin cryptocurrency, which it says are unregistered investments. The regulator called the ICO an “illegal offering” of said securities and it accused the company of engaging in an “outright” scam.

AriseBank reportedly sought to raise $1B during its ICO, which began in late December and was scheduled to end later month. Investors were supposed to receive their distributions on February 10.

The SEC’s complaint said that the company employed endorsements by celebrities, used social media, and engaged in other marketing strategies to raise $600M. A sales pitch was used touting an algorithmic trading application that could engage in trades using different cryptocurrencies. Customers were told that they could get a Visa-affiliated credit card that would allow them to spend in over 700 kinds of cryptocurrencies and that the AriseCoin cryptocurrency could be used to purchase certain consumer services and goods.

The company purportedly failed to disclose the criminal records of certain executives. For example, AriseBank Co-Founder and CEO Jared Rice was previously charged with tampering with government records and felony theft. He is on probation after pleading guilty to the criminal charges. AriseBank President Kevin Spencer has been arrested a number of times and convicted. He went to prison for five years for felony robbery and was forced to pay a $250K fine. The SEC notes that investors should have been told about these convictions and the guilty plea so they could better determine whether to invest. Also, the criminal records of the two men would have impacted whether the Defendants could be granted the proper licenses to operate and run a financial institution.

The court, which granted the SEC’s order to stop the alleged ICO fraud, ordered a freeze of AriseBank’s assets and approved the naming of a receiver, who will be allowed to secure different AriseBank-held cryptocurrencies right away, including Bitcoin, Bitshares, Litecoin, Dogecoin, and BitUSD.

Rice, Co-Founder Stanley Ford, and AriseBank are the Defendants in the SEC’s case. The Commission wants disgorgement plus interest, penalties, permanent injunctions, and bars against the two men.

The Texas Department of Banking has also put out a cease and desist order against AriseBank demanding that it stop operations right away. According to the state’s Banking Commissioner, Charles G. Cooper, AriseBank’s use of the word “bank” in its name, as well as in marketing collateral, violates the Texas Finance Code because it creates the impression that the company is engaged in banking in Texas. Rice responded with a letter in which he refused to comply.

Our Texas securities fraud lawyers represent investors throughout the state. Contact Shepherd Smith Edwards and Kantas, LTD LLP today for your free, no obligation case consultation.

Read the SEC Complaint (PDF)

The Texas Department of Banking’s Cease and Desist Order (PDF)

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Houston Technology Company is Accused of $28M Texas Securities Fraud, Stockbroker Fraud Blog, December 26, 2017

Ameriprise Ordered to Pay $8M Over F-Squared Alpha Sector Strategy Sales, Institutional Investor Securities Blog, December 8, 2017

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