SEC Emergency Action Halts ICO Scam and Obtains Appointment of a Receiver to Protect Digital Assets
Litigation Release No. 24088 / March 29, 2018
Securities and Exchange Commission v. AriseBank, Jared Rice Sr., and Stanley Ford, No. 3-18-cv-0186-M (N.D. Tex. filed January 25, 2018)
The Securities and Exchange Commission announced that on January 25, 2018, it obtained an emergency temporary restraining order, asset freeze, and other expedited relief to halt a new Initial Coin Offering (ICO) claiming to have raised approximately $600 million from investors since November 2017.
In a complaint filed in federal court in Dallas, Texas on January 25, 2018, the SEC charged Jared Rice Sr., Stanley Ford, and their unincorporated entity AriseBank with violating the registration and anti-fraud provisions of the U.S. federal securities laws. According to the SEC's complaint, Rice, Ford, and AriseBank are alleged to have offered and sold investments in their purported "AriseCoin" cryptocurrency to investors in the United States and elsewhere. The SEC alleges that since November 2017, AriseBank has failed to register the ICO and enticed investment through a celebrity endorsement from Evander Holyfield and demonstrably false claims, including that AriseBank:
- purchased a 100-year-old commercial bank through which it offers customers FDIC-insured accounts;
- purchased an established investment banking and management firm; and
- provides customers the ability to obtain an AriseBank-branded VISA card with which they can spend any of 700 cryptocurrencies wherever VISA is accepted.
The SEC also obtained a court order freezing Rice, Ford, and AriseBank's assets and appointing a receiver over AriseBank, securing the order before AriseBank announced it would close the ICO, and convert investments to AriseCoin, on January 27.
On February 2, 2018, the Commission filed an amended complaint, adding allegations that the defendants failed to disclose information about Rice's criminal history and that they made false claims about the experience and involvement of AriseBank's President.
The SEC seeks injunctive relief, disgorgement plus interest, and civil penalties. The SEC also seeks officer-and-director bars against Rice and Ford and bars prohibiting them from offering digital securities again in the future.
The Commission's investigation was conducted by David Hirsch and supervised by Eric Werner, both of the Fort Worth Regional Office, and in conjunction with the Commission's Cyber Unit, for which Mr. Hirsch is the Fort Worth Cyber Liaison. The SEC's litigation is being conducted by Christopher Davis and Mr. Hirsch, and is supervised by B. David Fraser.
The Commission appreciates the assistance of the Federal Bureau of Investigation, the U.S. Attorney's Office for the Northern District of Texas, the Federal Depository Insurance Corporation, and the U.S. Patent and Trademark Office.
The SEC's Office of Investor Education and Advocacy issued an Investor Alert in August 2017 warning investors about scams of companies claiming to be engaging in initial coin offerings: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ia_icorelatedclaims.