UPDATE | February 6, 2018:
SEC States Kelvin Spencer Did Not Have Felony Robbery Conviction
On January 25, 2018, the SEC filed a lawsuit against AriseBank, a Dallas-based ICO that had sold itself to investors as a decentralized peer-to-peer cryptocurrency platform that "allowed customers to act as their own bank," propping up its unsubstantiated claims with marketing that used "many materially false statements and omissions to induce investment in the ICO." But when the SEC alleged that AriseBank's president, Kelvin Spencer, previously served a five-year sentence for a felony robbery conviction that also carried a $250,000 fine, they may have overstepped. On page 11 of an amended revision of the complaint provided today to ETHNews, the commission clears Spencer's name of its criminal past (but doesn't necessarily exempt him from culpability in AriseBank's alleged malfeasance):
"The SEC's original Complaint contained the erroneous allegation that Spencer has a criminal history. That is not the case. Having filed this case on an emergency basis, ex parte and under seal, SEC counsel first realized the error by speaking with Spencer after the case was unsealed. Upon speaking with him, SEC counsel determined that the prior criminal conduct alleged in the original complaint relates to another person with the same name and similar identifying characteristics. SEC counsel greatly appreciates Mr. Spencer's assistance in correcting its mistake and apologizes to him for it."
ORIGINAL | January 30, 2018:
On January 25, 2018, one day before the Texas Banking commissioner issued a cease and desist letter, the US Securities and Exchange Commission (SEC) filed a complaint against AriseBank, Stanley Ford, and Jared Rice Sr. in federal district court in Dallas. The complaint was unsealed late yesterday.
Over the last several months, AriseBank has undertaken an ICO (token offering) for AriseCoin, which the SEC alleges amounted to an "ongoing, fraudulent, and unregistered offering of securities." The token offering, which was meant to fund a supposed algorithmic trading application called aIExchanger, was scheduled to conclude on January 27, 2018.
Per the agency's complaint, the project's "offering materials use many materially false statements and omissions to induce investment in the ICO." These include a claim that AriseBank acquired a 100-year-old, FDIC-insured commercial bank. AriseBank is also accused of making "false statements about its association with a payments processing platform" and did not "disclose the criminal background of key executives."
Jared Rice Sr., the SEC notes, is "currently on probation for felony theft and tampering with government records."
In an announcement today, the SEC explained that AriseBank "used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months." It's not immediately clear how much the company raised before the SEC action.
Earlier this month, former professional boxer Evander Holyfield (who infamously had his ear bitten off by Mike Tyson) endorsed AriseBank on Twitter.
Of course, in November 2017, the SEC urged the public to be wary of such celebrity-endorsed token offerings.
The SEC is seeking "preliminary and permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties, and bars against Rice and Ford to prohibit them from serving as officers or directors of a public company or offering digital securities again in the future."
At the time of publication, the AriseBank website appears to no longer be operational.