The SEC seems to be on a roll when it comes to handing out penalties to fraudulent ICO scams. In a decision this afternoon the SEC announced significant penalties for two executives that amount to more than $2M dollars and froze the assets of the entity itself.
Attached is the SEC press release:
Two former executives behind an allegedly fraudulent initial coin offering (ICO) that was stopped by the Securities and Exchange Commission earlier this year have been ordered in federal court to pay nearly $2.7 million and prohibited from serving as officers or directors of public companies or participating in future offerings of digital securities.
AriseBank’s then-CEO Jared Rice Sr. and then-COO Stanley Ford were accused of offering and selling unregistered investments in their purported “AriseCoin” cryptocurrency by depicting AriseBank as a first-of-its-kind decentralized bank offering a variety of services to retail investors.
“Rice and Ford lied to AriseBank’s investors by pitching the company as a first-of-its kind decentralized bank offering its own cryptocurrency for customer products and services,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “The officer-and-director bar and digital securities offering bar will prevent Rice and Ford from engaging in another cryptoasset-based fraud.”
To settle the SEC’s charges, Rice and Ford agreed to be held jointly and severally liable for $2,259,543 in disgorgement plus $68,423 in prejudgment interest, and each must pay a $184,767 penalty. They also agreed to lifetime bars from serving as officers and directors of public companies and participating in digital securities offerings, and permanent prohibitions against violating the antifraud and registration provisions of the federal securities laws. Chief Judge Barbara M.G. Lynn of the U.S. District Court for the Northern District of Texas ordered the sanctions on December 11. Rice and Ford agreed to the settlements without admitting or denying the allegations in the SEC’s complaint.
On Nov. 28, 2018, the U.S. Attorney’s Office for the Northern District of Texas announced parallel criminal charges against Rice.
The SEC’s investigation and litigation was conducted by David Hirsch and Chris Davis and supervised by B. David Fraser and Eric R. Werner of the Fort Worth Regional Office. Staff from the SEC’s Cyber Unit assisted with the investigation and litigation. The SEC appreciates the assistance of the Federal Bureau of Investigation, U.S. Attorney’s Office for the Northern District of Texas, Federal Deposit Insurance Corporation, and U.S. Patent and Trademark Office.
The SEC’s Office of Investor Education and Advocacy issued an Investor Alert in August 2017 warning investors about scams of companies claiming to be engaging in initial coin offerings.
There will be more of these as the days and weeks tick off. The interesting portion of the above action is that clear fraud is found, assets are frozen, and the individuals have been barred from becoming officers of a public company and offering digital securities ever again.
Why is that interesting? Because the SEC is recognizing the ‘digital securities industry’. That may even be the bigger headline here. But for now, lets focus on the fraudsters.