The CEO of Dallas-based blockchain company AriseBank, Jared Rice Sr, has been arrested and indicted with multiple counts of securities and wire fraud, according to the US Attorney for the Northern District of Texas, Erin Nealy Cox.
The indictment says that he duped hundreds of investors out of more than $4 million from hundreds of investors.
“A monumental moment in banking history”
AriseBank was, according to the owners, the world’s first decentralized bank. It was supposed to offer banking services like ATMs and payment cards but claimed not to need licensing because customers would be holding their own money.
The two founders – Rice and one Stanley Ford – claimed that AriseBank had acquired two banks – “KFMC Bank Holding Company, a 100-year-old commercial bank, and TPBG, a 25-year-old investment banking and management firm” – in a press release dated January 2018. Said Rice at the time: “Having a crypto bank being able to successfully acquire a traditional bank – or in this case two – will go down as a monumental moment in banking history.”
It turned out that no such deal had ever taken place. Rice later claimed that he had been in acquisition talks with these businesses, and the press release was written by a PR company, and he didn’t read the final version before giving his approval.
Beginning in November 2017, AriseBank began its initial coin offering, selling AriseCoin tokens to the public in return for cryptocurrency. The funding drive was aided by an endorsement from boxing legend Evander Holyfield. According to Forbes, Rice claims that Holyfield was promised 2.5 million AriseCoins, projected to be worth around $3 million.
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— Evander Holyfield (@holyfield) January 5, 2018
After two months, AriseBank claimed to have raised $600 million. However, when the authorities froze the assets of AriseBank and its owners in January, they found only a couple of million dollars, according to the Wall Street Journal.
The SEC shut down the enterprise for failing to register its token as a security, and for false advertising. The Texas State Securities Board served a cease and desist order on the firm because of its use of the word ‘bank’ in its name.
“All I ever earned out of this were a couple of pairs of underwear…”
Rice himself has quite the criminal history. He pleaded guilty to a charge of felony theft and tampering with government records in 2015, and was on probation. He also stands charged in Texas of assault, after allegedly strangling the mother of his child and destroying evidence by stealing her mobile phone and deleting a recording of the incident in October 2017.
He allegedly spent the money raised from AriseBank investors on personal expenses. Interestingly, this included paying for a guardian ad litem, which is a court-appointed representative assigned to minors during acrimonious custody proceedings.
Rice’s apartment was raided on the 26th of January by federal agents, who seized electronic equipment. Said Rice at the time: “How many times in history has the government made regulations and people fought them?…All I ever earned out of this were a couple of pairs of underwear, pants, and a couple of shirts so I could wear them to meetings, maybe a few meals here and there, and a place to stay so I could get all this work done.”
He now faces up to 120 years in federal prison. “My office is committed to enforcing the rule of law in the cryptocurrency space. The Northern District of Texas will not tolerate this sort of flagrant deception – online or off,” said Cox.