DALLAS (CN) – Federal prosecutors said Wednesday they arrested the head of an alleged $4.25 million Dallas-based cryptocurrency scam that ripped off hundreds of investors.
Jared Rice, Sr., 30, of Dallas, was arrested within hours of a federal indictment being unsealed. It charges him with three counts of securities fraud and three counts of wire fraud.
Prosecutors say Rice co-founded AriseBank, served as chief executive officer and began promoting it and the AriseCoin cryptocurrency in 2017, falsely claiming an initial coin offering raised $600 million in a few weeks.
They claim he touted AriseBank as the world’s “first decentralized banking platform,” offering traditional banking services, debit cards and credit cards in addition to cryptocurrency services despite knowing AriseBank was not a bank and was not authorized by Texas to operate as one.
Cryptocurrency refers to a form of digital currency that uses encryption techniques to regulate the generation of new units and verify the transfer of existing units. Mainstream interest in cryptocurrencies grew substantially in 2017 as the value of Bitcoin, the best known cryptocurrency, spiked in value by several thousand percent in recent years. It remains a speculative and highly volatile investment due to sudden, sharp price swings.
The Securities Exchange Commission sued AriseBank, Rice and co-founder Stanley Ford in February, deeming their coin offering a “fraud.” The agency successfully halted the sale of the allegedly unregistered securities and the court appointed a receiver for AriseBank.
Rice told investors about being able to issued FDIC-insured accounts and issuing Visa-branded credit cards, according to the 13-page indictment.
“In actuality, AriseBank had not been authorized to conduct banking in Texas, was not FDIC insured, and did not have any sort of partnership with Visa,” prosecutors said in a written statement. “Even as he touted AriseBank’s nonexistent benefits in press releases and online, Mr. Rice quietly converted investor funds for his own personal use, spending the money on hotels, food, clothing, a family law attorney, and even a guardian ad litem.”
The indictment states Rice did not tell investors that he had previously pleaded guilty and is currently on probation for state felony charges of tampering with government records for forging a Texas Secretary of State incorporation document and theft for stealing investor money in an earlier internet-related business scheme.
AriseBank’s court-appointed receiver did not immediately respond to an email requesting comment Wednesday evening.
The case is being prosecuted by Assistant U.S. Attorneys Mary Walters and Siddharth Mody in Dallas.