Initial Coin Offering Scam Targeted Investors for Fake Decentralized Bank
The Securities and Exchange Commission put a stop to what it is calling an initial coin offering scam. The initial coin offering or ICO apparently targeted retail investors to raise funds for a fake “decentralized bank”.
According to SEC, the Dallas-based, AriseBank, used social media, a celebrity endorsement, and other tactics to raise funds. AriseBank claimed it raised $600 million of its $1 billion goal in just two months, but much of the information the company was using to raise funds were false.Enticing Offer
AriseBank was co-founded by Jared Rice Sr. and Stanley Ford. The SEC says the two allegedly offered and sold unregistered investments in “AriseCoin.” This cryptocurrency had a picture of AriseBank and claimed to be the first-of-its-kind decentralized bank. They said AriseBank offered banking products and services using more than 700 different virtual currencies. Apparently, the cofounders told potential investors they had developed an algorithmic trading application that specialized in cryptocurrencies.
AriseCoin’s public sale began around Dec. 26, 2017, and was originally scheduled to conclude on Jan. 27, 2018. Investors were told to expect funds by Feb. 10, 2018.The Charges
The SEC is fighting against the co-founders saying that their company lied about purchasing an FDIC-insured bank. This claim led investors to believe they were dealing with FDIC-insured accounts. The initial coin offering scam even encouraged customers to sign up for an AriseBank-branded VISA card to spend any of the 700 cryptocurrencies. The SEC also says that AriseBank also did not disclose the criminal background of its executives.
“We allege that AriseBank and its principals sought to raise hundreds of millions from investors by misrepresenting the company as a first-of-its-kind decentralized bank offering its own cryptocurrency to be used for a broad range of customer products and services,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.The Fallout
The SEC and various other law enforcement agencies are asking victims to step forward. Investors in the AriseBank initial coin offering scam are being asked to contact the SEC. This is somewhat new territory for the SEC.
“This is the first time the commission has sought the appointment of a receiver in connection with an ICO fraud,” says Steven Peikin, Co-Director of the SEC’s Enforcement Division. “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.”
For now, there is an emergency asset freeze over AriseBank. With the court order, the SEC, moved to protect the digital assets before they could be dissipated. The fear was that AriseBank would try to secure various cryptocurrencies in their holding, such as, Bitcoin, Litecoin, Bitshares, Dogecoin, and BitUSD.
In court, the SEC wants preliminary and permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties. Back in August, the SEC’s Office of Investor Education and Advocacy issued an “Investor Alert” warning investors about initial coin offerings scams. They hope members of the public will stay vigilant to the threat.
To learn more about how to proceed with information on various forms of financial fraud, contact Jeffrey Newman Law today!