Jared Rice Sr., AriseBank CEO, faces a possible prison sentence after defrauding hundreds of investors of over $4 million. On November 28th 2018, the United States Department of Justice announced that Rice was indicted on three counts of securities fraud and three counts of wire fraud. If convicted, Rice faces up to 120 years in federal prison.
Details of AriseBank CEO’s Alleged Fraud and Potential Prison Sentence
30-year-old Jared Rice is the man behind the so-called ‘decentralized’ AriseBank and its associated cryptocurrency, AriseCoin. Last Wednesday, Rice was arrested by the FBI after a long investigation that so far, has resulted in charges including defrauding investors of more than $4 million.
According to legal documents released just last week, Rice allegedly lied to his investors during AriseBank’s Initial Coin Offering (ICO). Rice told prospective investors that Texas-based AriseBank was the world’s “first decentralized banking platform” which could offer consumers FDIC-insured bank accounts.
He also claimed that the platform provided traditional banking services such as Visa credit and debit cards.
The recent investigation however, suggests the opposite. According to the US Attorney’s Office, AriseBank had never received authorization to perform any banking activity in Texas, was not FDIC-insured, and never had a partnership with Visa.
In fact, Rice allegedly used some of his investors’ funds generated during the ICO in various personal spending sprees. The Texas-based prosecutors claim the following:
“Even as he touted AriseBank’s nonexistent benefits in press releases and online, Mr. Rice quietly converted investor funds for his own personal use, spending the money on hotels, food, clothing, a family law attorney, and even a guardian ad litem.”
The most shocking aspect of the emerging case concerns the total dollar amount raised during AriseBank’s ICO.
While Rice’s charges include just $4 million worth of fraud, his company’s ICO raised $600 million in a matter of weeks.
During that time span, Rice never disclosed that he had previously plead guilty to “state felony charges in connection with a prior internet-related business scheme”.
The Implications of Regulatory Enforcement for Cryptocurrencies Explained
In recent months, the larger cryptocurrency community has witnessed a wave of increased regulatory activity.
The SEC has charged both ICOs and exchanges with securities violations. They’ve also expanded their crackdown beyond such areas by targeting investment advisors and custody solutions.
Even individual states have taken part in the recent surge. Colorado’s own securities regulatory authority launched an ‘ICO Task Force’ which has shut down 18 ICOs in 2018.
The increased enforcement has pushed the cryptocurrency industry towards security tokens.
In differing from traditional ICOs, Security Token Offerings (STOs) account for the existing securities laws as established by the applicable regulatory bodies.
Some companies have already announced the cancellation of upcoming ICOs, after turning to STOs as a compliant means to raise funds.
With recent news headlines including stories such as Rice facing up to 120 years in prison, the pattern towards STOs is not likely to decrease anytime soon.
What do you think of the recent charges against AriseBank’s CEO? Will this lead to additional investigations which uncover ICO-related fraud? Let us know what you think in the comments below.