Federal prosecutors in Dallas announced Wednesday that they have charged AriseBank CEO Jared Rice Sr. with multiple counts of fraud related to a North Texas cryptocurrency scheme that used former heavy weight boxing champion Evander Holyfield as a spokesman.
Rice, in a 13-page indictment unsealed Wednesday, was charged with three counts of securities fraud and three counts of wire fraud for allegedly “duping hundreds of investors” out of $4.25 million – money that he used for personal items. The FBI arrested him yesterday and he is scheduled to have a first appearance hearing before a federal magistrate or judge Thursday. If convicted, he faces up to 120 years in prison.
Northern District of Texas U.S. Attorney Erin Nealy Cox claims that Rice lied to investors and potential investors by stating that AriseBank had partnerships with VISA credit cards and offered consumers FDIC-insured bank accounts. In reality, Nealy Cox argues, AriseBank has no government authorization to conduct any banking operations in Texas.
The federal criminal charges are only Rice’s latest problems.
In January, the U.S. Securities and Exchange Commission also charged the 30-year-old with fraud and selling unregistered securities in an attempt to raise $600 million in capital through the sale of its own cryptocurrency called “AriseCoin.”
As a result of the SEC’s charges, Chief Judge Barbara Lynn of the U.S. District Court in the Northern District of Texas, issued an emergency asset freeze ceasing all operations at AriseBank, which advertised itself as the “first decentralized banking platform” in the world. In a precedent-setting move, Chief Judge Lynn also appointed Jones Day partner Mark Rassmussen, an expert in cryptocurrency, as a federal receiver over AriseBank and all of its assets.
The federal indictment states that Rice falsely claimed in marketing materials that AriseBank’s “Initial Coin Offering” raised $600 million, which would have made it the largest ICO in history. He also failed to inform investors that he had a prior felony conviction related to another internet business scheme.
“My office is committed to enforcing the rule of law in the cryptocurrency space,” said Nealy Cox. “The Northern District of Texas will not tolerate this sort of flagrant deception – online or off.”
Assistant U.S. Attorneys Mary Walters and Sid Mody are leading the criminal prosecution.
Legal experts following the case say it is a first-of-its-kind enforcement action by the SEC and a harbinger of many similar cases to come.
“This case is absolutely representative of what is coming,” CoinSource General Counsel Arnold Spencer told The Texas Lawbook in January when the SEC charges were filed. “We are about to see a sustained wave of these kind of enforcement actions in the crypto-currency industry.”