An ICO fraud case has concluded with a guilty plea. Jared Rice Sr., the former CEO of decentralized bank startup AriseBank and creator of the AriseCoin, has pleaded guilty to cheating investors out of $4.2 million in a crypto scam reportedly guaranteeing double-digit returns.
The announcement was made by U.S. Attorney for the Northern District of Texas Erin Nealy Cox after Rice was arrested by the FBI at year-end 2018. Rice has also since reached a settlement with the U.S. SEC in a civil action for which he and another former executive of the startup are on the hook for $2.5 million. Cox stated:
“We will not tolerate flagrant deception of investors – virtual or otherwise.”
First of Its Kind Guilty Plea
In one of the first such pleas in a U.S. federal court by an individual tied to a cryptocurrency company, Rice has pleaded guilty to a single count of securities fraud. He entered the plea in a federal court in Dallas on March 20, admitting that he lied to potential investors.
Rice is guilty of scamming hundreds of investors out of buying the proprietary AriseCoin cryptocurrency, which according to reports attached an unrealistic promise of “no-risk returns” of as high as 20%. Investors poured $4,250,000 into the ICO to purchase the proprietary AriseCoin, using bitcoin, Ethereum, and Litecoin in addition to fiat money.
Rice claimed to raise $600 million in an ICO, which was a lie and failed to disclose to potential investors that he previously pleaded guilty to stated felony charges tied to an internet related scheme.
“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,” according to the U.S. Attorney’s Office for the Northern District of Texas.
Rice has touted AriseBank as the world’s maiden decentralized bank and claimed it could provide “customers FDIC-insured accounts and transactions,” which according to the U.S. Securities and Exchange Commission was false.
He also advertised an AriseBank-branded Visa card that would supposedly support hundreds of virtual currencies despite having no relationship with the company that would supposedly provide this service (Marqueta.) AriseBank was not authorized to perform banking activities in the state of Texas.
Rice is expected to have to repay the victims of his scheme who he tricked. He is facing up to two decades in prison and is expected to be sentenced in July. He was originally facing up to 120 years in federal prison.