The American stock market regulator, Securities and Exchange Commission (SEC) indicated that it had sued AriseBank, a cryptocurrency banking firm, coindesk.com reported. The regulator charges the accused of committing fraud in initial coin offerings (ICO). The news comes in the wake several significant developments taking place in the digital currency space.
The SEC charged AriseBank along with its co-founders Stanley Ford and Jared Rice, of issuing unregistered securities in its recent ICO. This was based on its recent filing in the court submitted to Texas’ Northern district on January 25. The regulator filed its charges a day ahead of the States’ Department of Banking announcing a cease-and-desist order on the cryptocurrency banking firm.
The digital currency company claimed that it was offering a number of banking products in respect of cryptocurrency. Incidentally, former professional boxer, Evander Holyfield, endorsed the company’s ICO. In its press statement in January, the company indicated its launch of AriseCoin sometime in November last year. The cryptocurrency banking firm claimed that it could mop up funds of more than $1 billion by way of token sales from private, as well as, public offerings.
Violation Of Securities Regulations
The SEC contention is that AriseBank or its token is known as AriseCoin was not registered with it. Therefore, the regulator believes that the cryptocurrency banking company violated securities regulations. The SEC charged that the ICO was originally meant to close on January 27 and that the tokens issued fell under the securities scope.
Aside from the violation, the regulator argued that the company disclosed wrong statements to possible investors. The objective of offering false statements was to facilitate its token sale smoothly. In a blog post carried on Facebook on October 4, AriseBank defended its model with SEC. In the post, the company stated,
“Rather than close our ICOs and shiver in fear, companies like AriseBank have geared up for the coming fight with the SEC.”
Disagreement With SEC
The digital currency banking firm did not agree with the American regulator that token sales should be considered as securities. The company argued that a private firm could ‘issue private stock to anyone who wants to invest in their company and/or products without the SEC’s involvement in any way.’ Aside from that, the company revealed that it was acquiring two FDIC-insured banks, TPMG and KFMC Bank Holding Company.
On the other hand, the SEC charged AriseBank of providing false information on the acquisition of these two firms. The regulator pointed out that the two banks were not insured by FDIC, which insures deposits and monitors financial institutions for the protection of consumer interests.
Risk Asset Dissipation
The SEC indicated that due to the ongoing fraudulent offering nature and risk of asset dissipation, it was seeking relief on an emergency basis. This included asset freezes, restraining orders on a temporary basis and the naming of a received over AriseBank.
The SEC filing could be a setback for those who are eager to enter the ICO market. That is primarily because more ICOs could mean that there is less demand for the current digital currencies.