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SEC Halts Fraudulent ICO by AriseBank

  • By:Bennett Jay Yankowitz

On January 30, 2018, the SEC announced that it had obtained a court order to stop an ICO, which you allege was fraudulently targeting retail investors.  The SEC alleged that the ICO used celebrity endorsements, social media and other “wide dissemination tactics” to raise what it claimed was $600 million in less than two months.

The ICO involved the sale of cryptocurrency tokens by AriseBank to fund what the promotors claimed would be the first decentralized bank, offering a variety of banking services using more than 700 different cryptocurrencies.  The company claimed that it was developing an algorithmic trading application to automatically trade cryptocurrencies.

The SEC alleged that AriseBank falsely stated that it had purchased an FDIC-insured bank that would let its customers open FDIC-insured accounts and the ability to obtain a VISA card that could be spent using any of the 700 cryptocurrencies.  The SEC also alleged that AriseBank failed to disclose that several of its key executives had criminal backgrounds.

The SEC sought and received emergency relief from the Federal District Court, including the appointment of a receiver for AriseBank’s assets (including its digital assets).

The SEC’s press release contains additional information.

In addition, the Texas Banking Commissioner on January 28, 2018 issued a cease-and-desist order requiring AriseBank to cease using the word “bank” and not to engage in the banking business in Texas.

Posted in: ICO Legal Developments