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Alleging Fraud, SEC Shuts Down AriseBank’s Celebrity-Endorsed ICO of Purported “Decentralized Bank”

In its latest effort to combat scams in the initial coin offering (ICO) space, the SEC announced today that it has obtained a court order cutting off AriseBank’s ICO of “AriseCoin” tokens, appointing a receiver over AriseBank and freezing AriseBank’s and its co-founders’ digital and other assets. The SEC’s complaint against AriseBank and its co-founders alleges that the ICO, which AriseBank claimed had raised over $600 million and would fund what it touted as the first “decentralized bank,” was an illegal, fraudulent and unregistered offering of securities that violated multiple federal securities laws.

This court order follows a cease-and-desist order issued by the Texas Department of Banking earlier this month in response to regulatory violations by the Texas-based company. That order barred AriseBank from continuing to falsely imply that it engages in the business of banking in Texas and offering services to Texas residents.

The AriseBank ICO was officially endorsed by boxing champion Evander Holyfield. Although Holyfield was not named in the SEC’s complaint, a statement issued by the SEC in November of 2017 cautioned celebrities and other promoters of ICOs that, if they promote a virtual token or coin that is a security, then their promoting may be unlawful if they fail to disclose the nature, source and amount of any compensation paid in exchange for their endorsement, and they could also potentially be liable for violations of the anti-fraud provisions of the federal securities laws or for offering unregistered securities.

© 2018 Proskauer Rose LLP.

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About this Author

Wai Choy, Proskauer Law Firm, New York, Media and Entertainment Attorney
Associate

As a corporate associate in the Technology, Media & Telecommunications Group, Wai Choy focuses his practice on technology, media and intellectual property-related transactions and counseling in a wide range of fields, including the technology, entertainment, social and new media, advertising, e-commerce, retail and professional services industries.

For example, Wai structures, drafts, negotiates and advises clients on legal and business aspects of:

  • Service agreements, statements of work and service level...
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