Fraudulent ICO Latest Casualty in Crypto-Currency Fraud Sweep - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

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Fraudulent ICO Latest Casualty in Crypto-Currency Fraud Sweep

February 1, 2018

The Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) continued to send the message that a new sheriff has arrived for crypto-currency fraudsters.

Fraudulent ICO Latest Casualty in Crypto-Currency Fraud SweepFraudulent ICO Latest Casualty in Crypto-Currency Fraud SweepThe SEC announced the halting of a fraudulent Initial Coin Offering.

It was the fourth such announcement between the CFTC and the SEC in less than two weeks, and the two regulators also issued a statement announcing the assault:

When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like,” said the joint statement, “the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws.

The Divisions of Enforcement for the SEC and CFTC will continue to address violations and to bring actions to stop and prevent fraud in the offer and sale of digital instruments.

The latest culprit was AriseBank and its crypto-currency, Arisecoin. Here’s part of the SEC statement:

According to the SEC’s complaint, filed in federal district court in Dallas on Jan. 25 and unsealed late yesterday, Dallas-based AriseBank used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months.

AriseBank and its co-founders, Jared Rice Sr. and Stanley Ford, allegedly offered and sold unregistered investments in their purported “AriseCoin” cryptocurrency by depicting AriseBank as a first-of-its-kind decentralized bank offering a variety of consumer-facing banking products and services using more than 700 different virtual currencies.  AriseBank’s sales pitch claimed that it developed an algorithmic trading application that automatically trades in various cryptocurrencies.

The SEC alleges that AriseBank falsely stated that it purchased an FDIC-insured bank which enabled it to offer customers FDIC-insured accounts and that it also offered customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies.  AriseBank also allegedly omitted to disclose the criminal background of key executives.

The CFTC has, in the last two weeks, busted crypto-currency frauds including: a scheme which misappropriated over $6 million from customers involving the virtual currency My Big Coin Pay, a fraudulent scheme to sell Bitcoin, and a Ponzi scheme involving a so-called virtual currency advisory firm called Coin Drop Markets.

Fraudulent ICO Latest Casualty in Crypto-Currency Fraud Sweep
Stephanie Avakian

Of the most recent ICO, Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said, “We allege that AriseBank and its principals sought to raise hundreds of millions from investors by misrepresenting the company as a first-of-its-kind decentralized bank offering its own cryptocurrency to be used for a broad range of customer products and services.  We sought emergency relief to prevent investors from being victimized by what we allege to be an outright scam.”

Steven Peikin, Co-Director of the SEC’s Enforcement Division, added, “This is the first time the Commission has sought the appointment of a receiver in connection with an ICO fraud.  We will use all of our tools and remedies to protect investors from those who engage in fraudulent conduct in the emerging digital securities marketplace.”

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