AriseBank Founders Charged Fines for ICO Fraud
According to the US Securities and Exchange Commission (SEC), a US Federal court has ordered the founders and former executives of the cryptocurrency startup AriseBank to pay about $2.7 million in fines for ICO (Initial Coin Offering) fraud. This ruling was made after an investigation by the SEC revealed that AriseBank was conducting a fraudulent ICO.
The two former executives, Chief Executive Officer Jared Rice Sr. and Chief Operating Officer Stanley Ford have been ordered to pay a little over $2.25 million in disgorgement, along with a pre-judgement interest of $68,423. Added to that, they will each also have to pay civil penalties to the tune of $187, 767.
While neither Rice Sr. nor Ford admitted to any wrongdoing, both of them agreed to being prohibited from taking up offices in public companies or ever engaging in dealings related to digital currencies.
AriseBank had been hit with a lawsuit for token sale fraud in January by the SEC. The regulatory agency charged the company as well as the individuals behind the ICO with fraud.
One day prior to being charged by the SEC, AriseBank was issued a cease-and-desist order by the Texas Department of Banking, which stated that the startup was not authorized to offer banking services in the state of Texas, which is where the company was headquartered.
After a months-long investigation, the ex-CEO of the company was arrested on November 28 by the FBI. However, this arrest was due to a separate criminal charge made by the FBI for securities and wire fraud.
As per the list of charges, Rice had defrauded investors about his bank’s authorizations, where he claimed that AriseBank was the first decentralized banking platform and it could offer its customers bank accounts, debit and credit cards through services such as Visa that were insured by the Federal Deposit Insurance Corporation (FDIC).
Upon investigation, it was found that AriseBank had no access to FDIC insurance and neither did the bank have any connection with Visa or other payments services.
Crackdown on Crypto Startups
This is not the only case of the SEC cracking down on crypto startups. In November, the Securities Commissioner of Texas handed out an emergency cease and desist order to My Crypto Mine, a crypto investment firm, as well as the company’s founder Mark Steven Royer for acting on behalf of Bruce Bise, a white collar criminal and Samuel Mendez, a disbarred lawyer and issuing now worthless tokens via an investment scheme called BitQyk.
CoinAlpha Advisors LLC was issued a cease and desist order this month and was also slapped with a $50,000 fine for violating securities laws.