BLOCKCHAIN LAW GROUP

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Another ICO is halted by the SEC for alleged fraud
The SEC obtained a court order to halt an allegedly fraudulent ICO of AriseBank, which purported to be the first “decentralized bank” aiming to raise $1 billion. During its investigation of the token sale that began on December 26, 2017, the SEC found and alleged numerous violations of the U.S. securities law, including sale of unregistered securities and fraud.

According the SEC’s allegations, AriseBank and its founders Jared Rice Sr. and Stanley Ford made multiple false statements, including claiming a purchase of the FDIC –insured bank and an ability to offer token holders the FDIC-insured bank accounts. In addition, AriseBank allegedly omitted to disclose the criminal background of the key executives, which is required for the securities offering.

The SEC sough an appointment of a receiver, which has never been requested before in connection with the ICO. The court approved an emergency asset freeze over AriseBank as well as Jared Rice Sr. and Stanley Ford to protect the digital assets from being transferred away and appointed a receiver who took over the cryptocurrencies held by AriseBank. «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. We sought emergency relief to prevent investors from being victimized by what we allege to be an outright scam,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

In this case, the SEC seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties, and to bars Jared Rice Sr. and Stanley Ford from serving as officers or directors of a public company or offering digital securities in the future. The SEC investigation was conducted with an assistance from the Federal Bureau of Investigation (FBI), U.S. Attorney’s Office for the Northern District of Texas, Federal Deposit Insurance Corporation, U.S. Patent and Trademark Office, and Texas Department of Banking.



Summarized by Katrina Arden
Attorney and founder of Blockchain Law Group
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