Toward the end of November, one of the founders of AriseBank, a cryptocurrency company operating out of Texas, was arrested by the FBI for his participation in a multi-million dollar scam tied to the platform and its initial coin offering (ICO). Jared Rice, who was acting as the company’s CEO, was charged with fraud and he, along with fellow fraudster and AriseBank founder Stanley Ford, has now been slapped with a $2.7-million fine by a U.S. federal court.
According to an announcement on the website of the U.S. Securities and Exchange Commission (SEC), the fine comes as a result of the pair’s false claims of offering “FDIC-insured accounts and traditional banking services, including Visa-brand credit and debit cards, in addition to cryptocurrency services.” FDIC refers to the Federal Deposit Insurance Corporation, which insures deposits made to the majority of the financial institutions in the country.
According to Shamoil Shipchandler, the director of the Fort Worth Regional Office of the SEC, “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. The officer-and-director bar and digital securities offering bar will prevent Rice and Ford from engaging in another cryptoasset-based fraud.”
Both Rice and Ford are on the hook for fines of $2,259,543 and $68,423 in prejudgment interest. They were also ordered to pay civilian fines of $184,767 apiece and will be banned from serving as officers of any public company that engages in digital securities. The scammers agreed to pay the settlements while neither admitting nor denying any wrongdoing.
Rice had told investors that he was legally operating the company in Texas in accordance with federal and state laws and that all deposits were insured. However, none of his statements was true and none of the proceeds collected were used as indicated by AriseBank, which was billed as the first decentralized bank in the country. What exactly happened to the more than $4 million collected through investments is not known, but Rice and Ford were living the life of luxury.
This won’t be the last time the SEC has to intervene against a fraudulent company, whether it be in the crypto or the fiat space. As long as there is an opportunity for someone to try and game the system, there will always be some weasel who thinks he can scam people out of the money. As history has shown, however, these individuals always end up paying for their actions.
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