Risk & Compliance

AriseBank Execs Fined $2.7M for ICO Fraud

The startup's founders allegedly duped investors by making false statements about what they claimed to be the first "decentralized" bank.
Matthew HellerDecember 13, 2018
AriseBank Execs Fined $2.7M for ICO Fraud

The two founders of cryptocurrency startup AriseBank have agreed to pay nearly $2.7 million to settle charges that they raised money for what they claimed to be the world’s first “decentralized” bank through a fraudulent initial coin offering.

The U.S. Securities and Exchange Commission halted the offering of AriseCoin in January, alleging former AriseBank CEO Jared Rice Sr. and former COO Stanley Ford made false statements to investors in materials for the ICO.

AriseBank claimed it raised $600 million toward a goal of $1 billion by the time the SEC, which has been cracking down on ICOs, intervened by filing a civil enforcement action.

As part of a settlement of the case announced Wednesday, Rice and Ford agreed to pay $2,259,543 in disgorgement, $68,423 in prejudgment interest, and penalities of $184,767 each. They are also barred from serving as officers or directors of public companies or participating in future offerings of digital securities.

“Rice and Ford lied to AriseBank’s investors by pitching the company as a first-of-its kind decentralized bank offering its own cryptocurrency for customer products and services,” Shamoil T. Shipchandler, director of the SEC’s Fort Worth Regional Office, said in a news release.

The commission had previously called the AriseCoin offering an “outright scam.”

Rice and Ford, who claimed to have founded AriseBank in March 2017, began a public sale of its digital securities in December 2017. AriseBank claimed to be “one of the largest cryptocurrency platforms ever built,” focusing on “bringing cryptocurrency to the average consumer and using it to revolutionize banking.”

The SEC said the startup’s founders falsely stated falsely stated they had purchased a 100-year-old bank, which would enable AriseBank to offer customers FDIC-insured accounts, and that AriseBank also offered a branded VISA card that would allow customers to pay for goods and services using any of 700 different virtual currencies they could hold in their account.

AriseBank also allegedly failed to disclose the criminal histories of Ford and company President Kevin Spencer to investors. Both men have prior felony convictions.