SEC Obtains Court Order Halting Cryptocurrency Bank

By Ben Dell’Orto, Spring 2018 IAC Student Intern

Whether you’re slightly confused as to what Bitcoin is, or are kicking yourself for forgetting the password to your “Bitcoin Wallet,” cryptocurrencies are a popular subject lately. Two alleged fraudsters in Dallas, Texas thought they could capitalize on this popularity—and people’s lack of expertise on the subject—in creating an alleged scam Initial Coin Offering (ICO).

According to the SEC, Jared Rice Sr. and Stanley Ford founded AriseBank, which they claimed was a new type of “decentralized” bank, which offered investors “banking products and services using more than 700 virtual currencies” such as Bitcoin, Bitshares and Dogecoin. The pair allegedly claimed that the funds were raised through an algorithm that automatically traded in the cryptocurrencies. AriseBank also allegedly told customers that it had bought an FDIC-Insured bank which allowed it to provide “customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies.”

Unfortunately for Rice and Ford, on January 25, 2018, the Securities Exchange Commission (SEC) filed a complaint against AriseBank. The court found the SEC’s complaint persuasive and froze the assets of Ford, Rice and AriseBank. The SEC seeks court orders closing the bank down and barring the founders from serving as officers of a public company, along with requiring those involved to give up any “ill-gotten gains plus interest.” AriseBank’s official Twitter has been mostly silent since the day of the filing, save for a press release claiming that the bank didn’t need to be FDIC-insured.

We’ve talked about being careful with ICOs before, and they have been the subject of a FINRA alert last fall. And, we’ve advised about being extra careful when dealing with items that spark customer interest by relating a scam to recent news.  Like my piece on boiler room scams, while it might be exciting to play in headline-making investments, they can also make attractive targets for scammers.