Jared Rice, the CEO of AriseBank, a company that claimed it raised $600 million in an initial coin offering as part of an effort to “revolutionize banking” using cryptocurrency, is now facing allegations that he stole more than $4 million from the company’s investors.
Rice is already facing charges from the Securities and Exchange Commission, which halted the AriseBank scheme back in January.
And now, Rice is facing new charges brought by the U.S. Attorney’s Office.
According to the U.S. Attorney’s Office for the Northern District of Texas, Rice used AriseBank to defraud investors out of $4.25 million, which he allegedly used for his own personal gain.
Rice was arrested by the Federal Bureau of Investigation on Wednesday and charged with three counts of securities fraud and three counts of wire fraud.
According to court documents, Rice allegedly lied to investors about AriseBank, which was billed as the world’s “first decentralized banking platform.”
The company’s marketing materials stated that AriseBank was built on “one of the largest cryptocurrency platforms ever built,” and is “focused on bringing cryptocurrency to the average consumer and using it to revolutionize banking.”
The SEC previously stated that AriseBank claimed to be a “decentralized, peer-to-peer banking platform that allows users of its software to serve as their own bank,” which “gives people the freedom to hold, send, receive, buy, sell and spend cryptocurrency directly from their computer or mobile device.”
All of this was to be based on a proprietary digital currency called AriseCoin, which would supposedly allow the company to offer consumers FDIC-insured accounts and traditional banking services, including Visa-brand credit and debit cards, in addition to cryptocurrency services.
But none of that was true, according to U.S. Attorney’s Office.
In actuality, AriseBank had had not been authorized to conduct banking in Texas, where it was based, was not insured by the FDIC, and did not have any sort of partnership with Visa.
According to the SEC, AriseBank began raising money in November 2017 by launching an “initial coin offering” for AriseCoin. Through an ICO, a company raises money by offering a “coin” or “token” in exchange for other cryptocurrency or fiat currency.
The company allowed investors to buy AriseCoin using a variety of virtual currencies, including Ethereum, Bitcoin, Litecoin, Dogecoin, and NEM.
According to court documents, Rice falsely claimed that AriseBank’s initial coin offering raised $600 million and also hid the fact that he’d previously pleaded guilty to state felony charges involving another internet-related business scheme.
During the ICO process, AriseBank also apparently signed an agreement with former heavyweight champion Evander Holyfield to endorse the company.
Holyfield tweeted about the endorsement from his official Twitter account on Jan. 4, 2018, inviting his 268,000 followers to “join the biggest fight in history.”
— Evander Holyfield (@holyfield) January 5, 2018
During the ICO, investors used digital currencies like Bitcoin, Ethereum, Litecoin, and fiat currency to buy AriseCoin.
Rice then allegedly took more than $4 million of those funds to use for himself, spending the money on hotels, food, clothing, a family law attorney, and a guardian ad litem, a court-appointed guardian typically used to look over a child during divorce proceedings.
Rice now faces six total charges, beyond the previous SEC action against him. If convicted on the federal charges, Rice faces up to 120 years in federal prison.
“My office is committed to enforcing the rule of law in the cryptocurrency space,” U.S. Attorney for the Northern District of Texas Erin Nealy Cox said. “The Northern District of Texas will not tolerate this sort of flagrant deception – online or off.”