SEC Finally Files Fraud Suit Against Crypto Bank ICO – AriseBank
The U.S. Securities and Exchange Commission (SEC) has sued cryptocurrency banking company Arise Bank.
The Texas-based firm AriseBank and it’s co-founders Jared Rice Sr. and Stanley Ford, are being charged by the U.S. SEC for alleged fraud and issuing unregistered securities during its recent initial coin offering (ICO).
The complaint was filed on Jan. 25, just one day before the Texas State’s Department of Banking announced a cease-and-desist order on AriseBank’s operation went into effect. It was submitted to the Northern district court of Texas.
AriseBank is a cryptocurrency banking firm that claims to offer several banking products related to cryptocurrency. Its ICO was notably endorsed by former professional boxer Evander Holyfield.
The company started an ICO to launch its own token dubbed AriseCoin around November last year and claimed to have raised over $1 billion through both private and public token sales.
According to Coindesk, SEC says the sale was originally scheduled to conclude on Jan. 27 and argues that the token issuance, which did not exclude residents from the U.S., falls under the scope of securities. Also the fact that neither AriseBank nor the token called AriseCoin was registered with SEC, makes SEC insists that the firm has violated securities regulations.
SEC also said that in order to facilitate its token sale, the company also made false statements to potential investors.
In a Facebook post published on Oct. 4, the firm said, “Rather than close our ICOs and shiver in fear, companies like AriseBank have geared up for the coming fight with the SEC.”
Disagreeing with SEC’s stance that tokens may be considered and regulated as securities, the firm argued:
“The fact remains that a private company can issue private stock to ANYONE who wants to invest in their company and/or products without the SEC’s involvement in any way.”
Also in its Jan. 18 press release, AriseBank detailed that the company was acquiring two FDIC-insured banks, KFMC Bank Holding Company and TPMG.
However, the SEC alleges this information to be false, since neither of the two banks supposedly being purchased was insured by FDIC, the federal agency that insures deposits and oversees financial institutions for consumer protection.
The SEC concluded:
“Because of the ongoing nature of the fraudulent offering and risk of asset dissipation, the SEC seeks emergency relief – including temporary restraining orders, asset freezes, and the appointment of a receiver over AriseBank.”