AriseBank, a startup that ran afoul of regulators in the U.S. with its initial coin offering (ICO), agreed to pay $2.3 million, reported The Wall Street Journal.
The report, citing court proceedings in Dallas, reported that AriseBank Founder Jared Rice and Co-founder Stanley Ford took around $4.25 million from investors after claiming to raise $600 million, lied about an endorsement from boxing champion Evander Holyfield and pledged to set up more than 1,000 ATMs to let users access cryptocurrency accounts when launching its ICO. The ICO came at the height of the digital token and ICO craze of 2017.
The Securities and Exchange Commission (SEC) said it had appointed a receiver to secure AriseBank’s cryptocurrency holdings. A cybersecurity consultant was tasked with tracing the bank’s assets, and found about $1.1 million worth of cryptocurrency but was not able to locate the rest of the money raised. The funds that couldn’t be located are perceived to have been used, noted The WSJ.
In addition to AriseBank paying $2.3 million, Rice and Ford agreed to pay $184,767 in civil penalties, each pertaining to an SEC case covering the ICO. The two were also barred from participating in the sales of digital tokens for their lifetimes.
“Rice and Ford lied to AriseBank’s investors by pitching the company as a first-of-its-kind decentralized bank,” said Shamoil Shipchandler, director of the SEC’s Fort Worth regional office. The paper noted that Rice pleaded not guilty in the criminal case.
For his part, Rice said in a recent interview with The WSJ that the claims made about AriseBank could change, and the securities regulators have placed a standard on cryptocurrency companies that doesn’t match with the way the software is developed. “You have to know everything in this white paper is subject to change,” he said. “When you are building something and you say something is going to work, that does not mean it’s going to work.”