The inventor of cryptocurrency AriseCoin pleaded guilty this week to duping investors out of more than $4 million, announced U.S. Attorney for the Northern District of Texas Erin Nealy Cox.
AriseBank CEO Jared Rice, Sr. – who settled a civil action involving AriseCoin filed by the SEC’s Fort Worth regional office last year – pleaded guilty to one count of securities fraud Wednesday afternoon. His plea makes this case one of the first in which an individual has pleaded guilty to securities fraud involving a cryptocurrency in U.S. federal court.
According to his plea papers, Mr. Rice, 30, admits he lied to would-be investors, claiming that AriseBank – billed as the world’s “first decentralized banking platform” based on the proprietary digital currency AriseCoin – could offer consumers FDIC-insured accounts and traditional banking services, including Visa-brand credit cards, in addition to cryptocurrency services. In actuality, AriseBank had not been authorized to conduct banking in Texas, was not FDIC insured, and did not have any sort of partnership with Visa.
Even as he touted AriseBank’s nonexistent benefits, Mr. Rice quietly converted investor funds for his own personal use, spending the money on hotels, food, transportation, a family law attorney, and even a guardian ad litem – facts he failed to disclose to investors. He also failed to disclose that he’d plead guilty to state felony charges in connection with a prior internet-related business scheme.
Meanwhile, hundreds of investors bought approximately $4,250,000 in AriseCoin using digital currencies like Bitcoin, Ethereum, and Litecoin, as well as fiat currency.
“I’m proud of the Northern District of Texas’ innovative work enforcing the rule of law in the cryptocurrency space,” said U.S. Attorney Nealy Cox. “We will not tolerate flagrant deception of investors – virtual or otherwise.”
Statutorily, Mr. Rice faces 0 to 20 years in federal prison. His sentencing is slated for July 11, 2019. He is expected to be required to reimburse investors he deceived.
The Federal Bureau of Investigations conducted the investigation. Assistant U.S. Attorneys Mary Walters and Sid Mody are prosecuting the case.