The U.S. Securities and Exchange Commission (SEC) has obtained a court order halting an allegedly fraudulent initial coin offering (ICO) after it targeted retail investors to fund what it claimed to be the world’s first decentralised bank.
According to the SEC’s complaint, Dallas-based AriseBank used celebrity endorsements such as boxer Evander Holyfield and social media to trick investors out of $600 million of its $1 billion goal for its purported AriseCoin, the agency 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,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division.
The SEC alleges that AriseBank stated falsely that it had bought an FDIC-insured bank, enabling it to provide customers with FDIC-insured accounts. The agency adds that it also offered customers the chance to obtain an AriseBank-branded VISA card to spend any of the 1,000-plus digital currencies.
Since the emergency asset freeze AriseBank’s website has gone offline. Notably, it was back in January, that the company published a Medium blog when speculation that it may be a scam first appeared. The brief of the post reads: ‘AriseBank isn’t a scam. It’s a victim of libel and slander.’ It goes on to detail a number of claims that had been made against the company with responses to them all.
This notice from the SEC comes less than a week after the Texas Department of Banking sent AriseBank a cease-and-desist order barring its services in the state. According to a press release, AriseBank had violated Texas Finance Code Chapter 31 by using the word ‘bank’ in its name and marketing materials to imply that it is in the business of banking in the state.
In a letter to the Texas financial regulator, Jared Rice Sr., the co-founder of AriseBank, said that they would not comply with the cease-and-desist order, reports Reuters.
“It is absolutely clear we are here to end legacy banking as we know it or at least make them honest, transparent and able to commingle with the cryptocurrency banks of the future,” Rice said. “I respectfully oppose your mission to enable slavery amongst Texas residents and I will stand with force in regards to my mission to free Texas residents from the slavery you choose to further.”
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