The US Securities and Exchange Commission (SEC) has put the brakes on an initial coin offering (ICO) that was seeking to raise up to $1bn to develop ‘the world’s first decentralized bank’.
Dallas-based AriseBank was ordered to stop its fraudulent ICO and refund investor’s money, with the SEC reporting that ‘it used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600m of its $1bn goal in just two months’.
AriseBank and its co-founders allegedly offered and sold unregistered investments by claiming to be a ‘first-of-its-kind decentralized bank offering a variety of consumer-facing banking products and services using more than 700 different virtual currencies’. It also claims that it developed an algorithmic trading application that automatically trades in various cryptocurrencies.
Shamoil Shipchandler, director of the SEC’s Fort Worth Regional Office, said, “Attempting to conceal what we allege to be fraudulent securities offerings under the veneer of technological terms like ‘ICO’ or ‘cryptocurrency’ will not escape the Commission’s oversight or its efforts to protect investors.”
The SEC obtained an emergency asset freeze against AriseBank and filed charges against its co-founders Jared Rice and Stanley Ford. It also alleges that AriseBank falsely claimed that it had signed an agreement to buy the Federal Deposit Insurance Corporation (FDIC) insured bank and it also offered customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies.
The regulator intervened to protect the digital assets before they could be dissipated, enabling the receiver to immediately secure various cryptocurrencies held by AriseBank including Bitcoin, Litecoin, Bitshares, Dogecoin, and BitUSD.
“This is the first time the Commission has sought the appointment of a receiver in connection with an ICO fraud,” added Steven Peikin, co-Ddrector 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.”
AriseBank’s case is the third to be tackled by the SEC’s new cyber unit, which was created to target violations involving distributed ledger technology and initial coin offerings.
In December, the SEC filed charges against two organizers of a $15m initial coin offering (ICO). Quebec-based Dominic Lacroix and Sabrina Paradis-Royer, along with a firm called PlexCorp, were all charged with violating U.S. securities laws and defrauding investors.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
