The SEC has closed down AriseBank’s ICO, accusing it of being “an outright scam.” AriseBank had been promoted by former Heavyweight boxing champion Evander Holyfield and had apparently raised $600 million of its $1 billion target.
According to the SEC’s statement, AriseBank raised these funds through “social media, a celebrity endorsement, and other wide dissemination tactics.” However, they also claimed a regulatory standing that they didn’t have, specifically that it had bought a “FDIC-insured bank which enabled it to offer customers FDIC-insured accounts.“
“Neglected to share criminal backgrounds”
Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said that in the SEC’s view, AriseBank ‘sought to raise hundreds of millions from investors by misrepresenting the company as a first-of-its-kind decentralized bank.“
Seeing the perpetration of what she describes as “an outright scam,” the SEC “sought emergency relief to prevent investors from being victimized.“
The ICO’s assets have been frozen and put into receivership, enabling the receiver to take immediate control of AriseBank’s digital assets. The SEC’s Steven Peikin says this is “the first time the Commission has sought the appointment of a receiver in connection with an ICO fraud.”
AriseBank had also neglected to share with investors the criminal backgrounds of some of the company’s executives.
The SEC also issued a warning to ICOs that jargon would not protect them from SEC probing. Trying to hide “fraudulent securities offerings under the veneer of technological terms like ‘ICO’ or ‘cryptocurrency’ will not escape the Commission’s oversight,” said Forth Worth SEC Director Shamoil T. Shipchandler.
Holyfield appears to have been drawn to the ICO as a vehicle for his humanitarian work, particularly disaster relief. “I am really excited about this“, he had said, “cryptocurrency seems to be a good way to help the causes that I care about.” There is no suggestion that Holyfield himself was aware of the operational irregularities of the ICO.
AriseBank is not the first boxer-backed ICO to run aground on allegations of impropriety. Centra Tech, an ICO claiming to be developing a cryptocurrency debit card, attracted high-profile supporters like Floyd Mayweather, but was the target of a class action lawsuit last month alleging the firm had engaged in the unlawful sale of securities.