The year has started on a wrong path for the crypto world as the sector has suffered new regulations, total bans and hacking incidents from South Korea, China, Japan and now back to the United States. The currencies have managed to hold ground, but the new test of survival moves to the ICOs the underdogs that are pushing the blockchain popularity and adoption further.
The sector is however under attack as the Security Exchange Commission (SEC) filed a lawsuit against AriseBank in federal district court in Dallas, which it claims to be carrying out an Initial Coin Offering Scam. The lawsuit was filed a day before the Texas Banking Commissioner issued a cease and desist letter to the bank for violating Texas’s Finance Code 31.005 (a) which states that:
“A person may not use the term “bank,” or a similar term or a character, ideogram, phonogram, phrase, or foreign language word in its name, stationery, or advertising in a manner that would imply to the public that the person is engaged in the business of banking in this state.”
The lawsuit remained sealed until late yesterday where the details of how the bank used social media, celebrity endorsement and other wide, aggressive media coverage to raise $600 million from its target of 1 billion Dollars target in just two months. The first public sale began on Dec. 26, 2017 and the sale was scheduled to complete on Jan. 27. The Offering had the endorsement of Evander Holyfield (former professional boxer who had his ear bitten off by Mike Tyson).
The bank and its co-principals, Jared Rice Sr. and Stanley Ford allegedly created and sold Arisecoin an unregistered investment. It brands itself as the first decentralized bank offering with an algorithm that automatically trades in various cryptocurrencies.
The bank further is quoted claiming to have purchased two FDIC insured bank (KFMC Bank Holding Company and TPBG, a 25-year-old investment banking and management firm) that will enable it to provide insured accounts and a VISA card to its customers to transact in over 700 cryptocurrencies. They also failed to disclose their criminal background information as it could have been highly material to the investors.
The SEC lawsuit further unfolded as the Federal court issued an emergency asset freeze over AriseBank, Rice, and Ford and appointed a receiver to oversee the assets. As digital currencies are easily moved the SEC intervened to oversee the bank’s digital assets.
— Evander Holyfield (@holyfield) January 5, 2018
In August last year, the SEC’s Office of Investor Education and Advocacy issued an investor alert on ICOs and warning of possible lawsuits to celebrities and influencers who endorse such ICOS.