- The US Securities and Exchange Commission said on Tuesday it has shut down an alleged initial coin offering scam by AriseBank.
- AriseBank which is not registered with any banking or securities regulators, appears to have fabricated agreements with banks that do not exist.
The United States’ top securities regulator has shut down an initial coin offering by AriseBank in Dallas, Texas.
AriseBank allegedly used celebrity endorsers – including boxer Evander Holyfield – and social media to swindle retail investors out of $US600 million of the firm’s $US1 billion goal for “AriseCoin,” the SEC said on Tuesday.
“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,” the SEC’s co-chair of enforcement said in a press release. “This is the first time the Commission has sought the appointment of a receiver in connection with an ICO fraud.”
The halt and seizure of assets comes less than a week after the Texas Department of Banking sent a cease-and-desist letter to the company on January 26 and barred its cryptocurrency banking platform in the state.
According to the bank’s website, which was offline Tuesday morning, AriseBank is working on “the first ever decentralized banking platform,” and lists several transfer products with whimsical tech-infused names like aiExchanger, aTransfer, and aEx, and celebrity endorsements.
AriseBank could not be reached for comment, but the firm published a blog post on Medium when discussions that it may be a scam first started appearing online in early January.
“AriseBank isn’t a scam,” the brief essay reads. “It’s a victim of libel and slander.” The post goes on to share the contact info of co-founder and CEO Jared Rice on messaging app Telegram. Rice has not responded to Markets Insider’s request for comment.
According to his LinkedIn profile, Rice is simultaneously CEO of Dallas marketing firm Dotoji. However many links on the company’s homepage, including those to supposed contact information, point to offline pages. Dotoji’s registered business address is a home in a residential section of Dallas.
On January 18, AriseBank blasted out a press release saying it had acquired an Federal Deposit Insurance Corporation insured bank holding company. However, neither Arise Bank nor KFMC Bank Holding Company appear to be registered with regulators including the Texas Secretary of State nor the FDIC.
TPGB, another bank Arise says it has acquired a 25% stake in, does not appear to exist in any capacity.
AriseBank is far from the first ICO to be accused of fraud. Consulting firm Ernst & Young estimates that more than $US400 million of the $US3.7 billion raised through ICOs so far has been stolen by hackers, with phishing siphoning off up to $US1.5 million each month.
In December, SEC Chairman Jay Clayton had harsh words for ICOs after the agency shut down an offering. Clayton said in a blog post that despite claims of not being subject to regulation, many of the digital coins were in fact securities and thus subject to the agency’s authority.
“I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects,” he said.
“However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.”
This post will be updated if AriseBank or its executives respond to requests for comment.