A U.S. court based in Texas has announced the arrest and indictment of the CEO of AriseBank, for allegedly making false promises that the crypto company would be the world’s “first decentralized banking platform,” according to an indictment.
The subject of the indictment, Jared Rice, was also the founder of AriseBank. Launched in early 2017, AriseBank promised investors that it could provide customers with FDIC-insured banking services and Visa-branded credit and debit cards, in addition to cryptocurrency-related financial services. The startup also claimed that it could use Marqeta’s VISA API to provide integrations between crypto wallets and traditional payment processing streams. And it reported that it had bought two traditional U.S. banks.
According to the federal government, AriseBank was not, in fact, FDIC-insured, nor did it have partnership agreements with Visa or Marqeta. And it had not acquired other banks.
AriseBank conducted an ICO later in 2017 using its AriseCoin cryptocurrency. Rice claimed that the ICO raised $600 million within a few weeks and was on track to become the first billion-dollar ICO, while in reality the company’s total funding amounted only to about $4.25 million, according to the indictment.
Federal prosecutors said that Rice, 30, spent that money on goods and services for personal use. He faces a potential prison term of 120 years if convicted.
Lesson for Crypto CEOs: Don’t Lie About Traditional Banking Services
If you’re looking for a story about the federal government cracking down on crypto investors or entrepreneurs, this is not it.
The charges that Rice faces all stem from his having allegedly lied to investors about AriseBank’s ability to provide traditional banking services, like credit cards. They don’t directly involve the company’s crypto-related activities. The indictment does say that Rice used an ICO based on fraudulent information to raise funds and that he misled investors about his ability to integrate crypto wallets with conventional banking services. But the government’s charges are based on allegations of false claims involving those activities, not the facts that AriseBank carried out an ICO or explored the possibility of integrating with crypto wallets.
While there remain lots of unanswered questions about how crypto assets and services might be regulated — especially when it comes to potential civil liabilities related to them — this indictment doesn’t bring us any closer to a world where crypto activity leads to criminal charges.