Jared Rice Sr., CEO of the Dallas-based financial institution AriseBank, used to be arrested by way of the Federal Bureau of Investigation (FBI) on Wednesday, November 28, 2018, and charged with six counts of securities fraud and twine fraud. Rice is accused of scamming buyers out of greater than $four million thru a cryptocurrency rip-off that promised federally insured accounts and brand-name bank cards.
Previous this yr, the U.S. Securities and Alternate Fee’s (SEC’s) regional workplace in Citadel Value, Texas, won an emergency courtroom order to prevent AriseBank’s preliminary coin providing (ICO) for the cryptocurrency AriseCoin, which Rice falsely claimed had raised a whopping $600 million. In keeping with the courtroom submitting, Rice reportedly lied to buyers, pronouncing that the financial institution — which he referred to as the “first decentralized banking platform” — may be offering consumers FDIC-insured accounts, in addition to conventional banking services and products akin to Visa-brand credit score and debit playing cards.
Erin Nealy Cox — the U.S. District Legal professional for the Northern District of Texas — states that AriseBank used to be now not FDIC insured, nor did it have the authority to habits banking operations in Texas. It additionally didn’t have an authentic partnership with Visa.
Rice spoke of AriseBank’s allegedly non-existent advantages on-line and thru press releases whilst spending investor price range on lodge remains, clothes, foods, Uber rides, a circle of relatives legislation legal professional and parent advert litem. Prosecutors additionally accused Rice of spending the price range on his female friend.
Total, Rice raised more or less $four.25 million from buyers who used fiat foreign money, bitcoin, ether and litecoin price range between the months of June 2017 and January 2018 to shop for into AriseCoin.
The entire whilst, Rice in the long run did not divulge to buyers that he had in the past pled accountable to state criminal fees of tampering with executive data for forging a Texas Secretary of State Incorporation record and for stealing price range thru a previous web trade rip-off. Rice is at the moment on probation for those offenses.
Cox commented, “My workplace is dedicated to implementing the guideline of legislation within the cryptocurrency house. The Northern District of Texas is not going to tolerate this kind of flagrant deception — on-line or off.”
Rice faces as much as 120 years in jail if convicted. Assistant U.S. legal professionals Mary Walters and Sid Mody are prosecuting the case, however an ordeal date has now not been set.
Phony ICOs have change into a serious problem over the last yr. It’s estimated that roughly $500 million of buyers’ price range were misplaced to fraudulent ICOs in 2018 by myself, whilst the SEC’s listing of ICO circumstances is rising frequently.
One an identical case comes to Brooklyn-based businessman Maksim Zaslavskiy, who not too long ago pled accountable in a New York federal courtroom to conspiracy to dedicate securities fraud in reference to the ICOs REcoin Crew Basis, LLC (REcoin) and DRC International Inc., sometimes called Diamond Reserve Membership (Diamond).
Zaslavskiy touted the ICOs as being sponsored by way of actual property and diamonds respectively, when, in reality, he had bought neither, and the certificate he despatched to his buyers weren’t sponsored by way of the blockchain. He’s lately dealing with as much as 5 years in jail.
To view the entire courtroom submitting in opposition to Rice, click on right here.