
SEC halts AriseBank ICO - rbanffy
https://www.americanbanker.com/news/arisebank-raises-questions-about-ico-fraud-decentralized-banking
======
everdev
For all those still unsure about running an ICO in the US:

> "The ICO is an illegal offering of securities because there is no
> registration filed or in effect with the SEC, nor is there an applicable
> exemption from registration," the complaint said.

The complaint was filed by the SEC in Dallas and the court ordered an
emergency asset freeze of the company and it's two co-founders.

If you're considering an ICO, please attempt to understand your legal
obligations and risks. The window of ICO free for alls looks like it's ending.

~~~
IntronExon
It’s the SEC, there was never a window, and they’ll claw back anything and
everything they feel is out of bounds. People seem to sometimes confuse the
slow pace of government with a lack of inevitability, and assume there’s an
opportunity. It’s not an opportunity, it’s a trap.

I wouldn’t be surprised if a lot of, or all of the “legit” ICO’s are similarly
removed from play.

~~~
jhwang5
Not sure if they can or will claw back anything. There are simply too many
offenders to individually track down, prosecute, etc. Not saying they
shouldn't be punished, but there simply are too many offenders. The small time
offenders will probably be let off.

~~~
pwaai
Oh yes the SEC can absolutely claw back by applying laws in retrospective.
Having too many offenders was never a problem for SEC.

Just because you ICO'd before today doesn't mean you are safe at all, in fact
I'd argue the opposite-you've opened up yourself to unknown regulatory
liabilities.

~~~
jellicle
The SEC probably has about 5 employees working on ICOs, if that.

~~~
TeMPOraL
SEC's forays into ICO world caught public attention; it wouldn't surprise me
if that number suddenly increased, very soon.

~~~
IntronExon
I have to agree, and it’s hard to imagine the SEC turning down a bunch of easy
wins. The SEC is has internal politics just like any large group.

------
thisisit
> AriseBank announced Thursday it was correcting an announcement made the
> prior week about the acquisition of an FDIC-insured bank.

Wow, I checked the links to find this. First [1] they claimed:

> AriseBank now holds 100 percent of the equity in both KFMC Bank Holding
> Company, a 100 year-old commercial bank, and TPBG, a 25 year-old investment
> banking and management firm.

> As part of this acquisition, AriseBank can now offer its customers FDIC-
> insured accounts and transactions, and gain a strong backing for crypto
> aTMs™ which will grant consumers to easily convert and withdraw
> cryptocurrencies in U.S. Dollars.

Then a week later they "corrected" [2] the announcement:

> Because of the decentralized nature of the AriseBank software, it is wholly
> unnecessary for the platform to be FDIC regulated or insured as the
> individual users maintain full control of their funds. The company is
> currently in the process of acquiring two U.S.-based companies, KFMC Bank
> Holding Company and TPMG. KFMC Bank Holding Company is the owner of a
> 100-year old US commercial bank and TPMG is a 25-year old investment bank.
> The name of the actual FDIC-insured bank being acquired will be announced
> once all paperwork has been filed with the FDIC and regulators have approved
> its status.

This really getting out of hand.

[1][https://www.prnewswire.com/news-releases/arisebank-
announces...](https://www.prnewswire.com/news-releases/arisebank-announces-
first-ever-acquisition-of-traditional-banks-by-a-crypto-platform-expects-ico-
to-exceed-1b-due-to-popular-demand-300584461.html)

[2][https://www.prnewswire.com/news-releases/arisebank-
announces...](https://www.prnewswire.com/news-releases/arisebank-announces-
correction-on-recent-company-news-citing-fdic-status-and-
acquisitions-300588303.html)

~~~
pwaivers
Yes! AriseBank blatantly lies in the first statement about FDIC-insured
accounts. Here is another quote from the "correction":

> This entity is totally separate from AriseBank and will operate separately
> from AriseBank. AriseBank will never offer FDIC-insured accounts to our
> users, as this is not possible with a decentralized software.

------
slapshot
Much longer article: [https://www.americanbanker.com/news/arisebank-raises-
questio...](https://www.americanbanker.com/news/arisebank-raises-questions-
about-ico-fraud-decentralized-banking)

~~~
rubidium
Founder of AriseBank: "We're just a bunch of genius programmers who are trying
to change the world."

ICO founders all seem to be a mix of greed and hubris.

~~~
PeterisP
The SEC further said in its complaint that AriseBank “omitted to disclose the
criminal background of key executives — most notably, Rice, who is currently
on probation for felony theft and tampering with government records."

Seems there is something extra that the founder is forgetting to mention -
something that makes him not eligible to found anything bank-related.

------
dmitrygr

       Rice responded through a letter
       Posted on Steemit that AriseBank
       Refuses to comply with the Texas 
       Commissioner’s order and will
       not remove the word “bank”
       from its name. He argues that
       the AriseBank software is
       decentralized, not under the 
       Control of AriseBank, and
       Therefore not subject to bank
       regulation.
    

In Russia parents teach kids that you can never play "find the clever
technicality" with the government, because you will always lose. I guess in
America they don't teach kids that lesson?

~~~
TeMPOraL
I guess that's a testament to the faith of US citizens in the rule of law /
their government following the rules they themselves set up. Being able to
have such faith is a good thing in general, but it doesn't excuse stupidity.
As for Russia, their government is a bit more "move fast and break things", I
would guess.

~~~
dmitrygr
I think it is more that in the rest of the world people understand the purpose
of the law, and do not get hung up on the words, whereas in the USA people
look at the words very carefully and try to find some way around the specific
wording of the laws.

A law stating, for example, "no man shall shoot a gun at another" will clearly
mean "you cannot shoot anyone" in the rest of the world, whereas in USA you
can expect lawsuits seeking the court's definition of "shoot", "gun" and
"man". Why? Because it does work that way often in USA.

Same in this case. I imagine a good lawyer might be able to find a way in
which AriseBank really was "not really _IN_ texas" and in fact was "not
_REALLY_ a bank"

~~~
TeMPOraL
That sounds about right, too. I guess I was describing the "how one expects
the government will behave" angle. My personal impression is that USGOV would
happily take the bait and end up tied in court over the definitions of
"shoot", "gun" and "man", _most of the time_. This is not one of those times,
though.

(And to be clear, with Russians, I meant a quick "yup, we didn't word this
precisely enough, but both of us know what we meant there", followed by jail
time.)

------
pwaivers
Can anyone access their website [1] or whitepaper [2]?

It is incredibly scary that such a huge ICO can disappear from the internet.
Imagine if another company that was raising $600 million just disappears from
the web.

[1] [http://arisebank.com/](http://arisebank.com/)

[2] [https://www.arisebank.com/wp-
content/uploads/2017/12/elevato...](https://www.arisebank.com/wp-
content/uploads/2017/12/elevator-whitepaper.pdf)

~~~
panarky
The 100-page developer whitepaper is still available in Google's cache.

[https://webcache.googleusercontent.com/search?q=cache:F7TfYD...](https://webcache.googleusercontent.com/search?q=cache:F7TfYD-G9ksJ:https://www.arisebank.com/wp-
content/uploads/2017/12/developer-whitepaper.pdf)

~~~
polynomial
> [https://file.io/kQ2cqm](https://file.io/kQ2cqm)

{"success":false,"error":404,"message":"Not Found"}

~~~
panarky
Looks like file.io deletes the file after it's downloaded once.

Here's a link good for 24 hours
[https://dropfile.to/JBt2vu7](https://dropfile.to/JBt2vu7)

------
api
The assets include Dogecoin.

We all died in 2000 when the end of the world came. This is a parody timeline,
sort of like when shows go on for too many seasons and hack writers take over.

~~~
0xdeadbeefbabe
It's like someone did this on purpose to surprise Robert Frost (he favors
fire).

~~~
drdeca
"Some say the world will end in fire, Some say in ICO." ?

------
granaldo
and the never ending long list of ICOs
[https://www.coingecko.com/en/ico](https://www.coingecko.com/en/ico)

------
KasianFranks
Good to see the separating of low quality scam ICOs from legitimate ones.

~~~
Waterluvian
I'm not trying to start anything here. What are some examples of clearly
legitimate ICOs?

~~~
hudon
One of the first ICOs, Ethereum, run by the Ethereum Foundation in
Switzerland, has successfully created a platform to run ICOs. It is legitimate
so long as there is at least 1 Ethereum-based ICO that leads to a useful
product.

~~~
Waterluvian
And if there aren't any, it's like a meta ponzi scheme.

I'm optimistic that there's surely something practical out there.

~~~
hudon
For something practical, I’d look at Bitcoin. It seems to be somewhat useful
for routing payments around regulation. Even at that, though, it currently
isn’t very good due to how inefficient the blockchain is. Maybe non-blockchain
technologies like the Lightning Network will help... but if you can’t even
create a successful payment network with a blockchain, I don’t see any reason
to be optimistic, given that no other use cases have shown any hint of
success.

------
FLUX-YOU
>The SEC said that for the first time in connection to an ICO fraud, it has
appointed a third-party custodian, or receiver, to secure the firm's
cryptocurrency holdings. Those assets include bitcoin, litecoin, bitshares,
dogecoin and bitUSD.

How exactly do they plan to do that? Are they raiding machines for
passwords/private keys as a part of asset freezing?

~~~
IntronExon
Most people aren’t crazy, stupid, or brave enough to defy court orders
indefinitely.

~~~
FLUX-YOU
They can move the cryptocurrencies out and claim they got hacked. How do you
prove they know the password/private key to a new wallet address that isn't
tied to any exchange identity/background check?

~~~
IntronExon
Subpeana _everything_. The government has a lot of power and a long arm, and a
few centuries of experience hunting down money trails.

