On Wednesday, the FBI arrested Jared Rice Sr. on charges of promoting a fraudulent ICO, the Department of Justice reports. According to the U.S. Attorney’s Office, Northern District of Texas, the defendant allegedly defrauded investors of more than $4 million. Erin Nealy Cox, the US Attorney for Northern District of Texas said that the accused ran a cryptocurrency scheme. The action comes after the reopening of an indictment in which Rice faces various counts of wire fraud.
Interestingly, Mr. Rice is a defendant in a lawsuit that the Securities and Exchange Commission (SEC) filed. According to court documents, the SEC sought restraining orders to stop an initial coin offering (ICO). Allegedly, AriseBank of which Rice is the co-founder and CEO, claimed to offer a variety of crypto-focused banking products. Particularly, the services and products purportedly supported over 700 digital assets drawn from the cryptocurrency sector.
Further, the bank claimed to be “one of the largest cryptocurrency platforms ever built”, the court documents say. Additionally, AriseBank promised to bring cryptocurrency closer to the common man. At the same time, it would use the ICO to fundamentally change banking. In regard to the ICO, the bank began crowdfunding beginning November 2017. AriseBank claimed that it would supply AriseCoin as part of the ICO.
ICO and the Rule of Law
By the time the SEC filed for the restraining order, the ICO claimed to have netted over $600 million. The alleged reasons for the filing of the order was a lack of registration for the ICO as well as using false statements. Further, the ICO claimed close working relationship with VISA, all of which were for the purpose of duping would-be investors.
Therefore, the FBI arrested the mastermind Wednesday who allegedly raised up to $4.25 million by the conclusion of the ICO.
Speaking after the arrest, Nealy Cox, the U.S. attorney said, “My office is committed to enforcing the rule of law in the cryptocurrency space.” The suspect could do a 120 year term in jail if charged on all the counts of fraud.
Cease and Desist Order
Unfortunately, the cases of people charged for promoting fraudulent ICO are not new. The CryptoCoin reporter revealed that various ICOs in Colorado received a cease and desist order on suspicions of fraud. As the publication highlights:
“The Division of Securities of Colorado has launched an investigation into three crypto companies’ initial coin offerings (ICOs). Gerald Rome, Colorado Securities Commissioner has reportedly signed orders to show cause for the companies. The court orders seek more information regarding the background of the companies. Background checks are routine.”
Finally, the frequency of ICO scams are one major reason the product is unpopular. For that reason, markets are migrating to the Security Token Offerings (STOs). This is because the products offer far more security and reliability. Further, STOs have real value and they give investors an opportunity to partake in a project’s success.