Jared Rice, Sr., the inventor of AriseCoin, Jared Rice Dr. has been was sentenced to five years in prison for his role in a heist that defrauded investors out of $4.25 million worth of cryptocurrency.
Mr. Rice also settled a civil action involving AriseCoin filed by the SEC’s Fort Worth regional office just last year. He pleaded guilty to one count of securities fraud that happened in early 2019 and was sentenced Wednesday by U.S. District Judge Ed Kinkeade, who ordered him to pay $4,258,073 in restitution.
Mr. Rice, 33, admitted he lied to his potential investors, claiming that AriseBank, the world’s first decentralized banking platform based on the proprietary digital currency AriseCoin, will offer consumers FDIC-insured accounts and traditional banking services, including Visa-brand credit cards, in addition to cryptocurrency services in his plea papers.
In reality, AriseBank had not been authorized to conduct any banking in Texas, it was not FDIC-insured, and it did not have any sort of partnership with Visa. Apart from lying about the company’s benefits, Mr. Rice also silently transferred investor funds for his own personal gain. He spent the money he laundered on hotels, food, transportation, a family law attorney, and even a guardian ad litem. These are all facts he hadn’t disclosed to investors.
He also didn’t reveal the fact that he had pleaded guilty to state felony charges in connection with an internet-related business scheme. As for now, hundreds of investors have bought almost $4,250,000 in AriseCoin using cryptocurrencies like Ethereum, Bitcoin, and Litecoin, as well as fiat currency. The FBI’s Dallas Field Office conducted the investigation, and Assistant U.S. Attorneys Mary Walters, Sid Mody, and Erica Hilliard prosecuted the case.
Rice was sentenced to five years in prison afterwards.
Regulation of Cryptocurrency
As cryptocurrencies continue to grow in market cap and influence, whistleblowers will be essential in helping the government catch wrongdoers and prevent fraud. Whistleblowers can also take advantage of the various whistleblower reward programs offered by the SEC, CFTC, and IRS and potentially share in any government recovery.
The SEC, CFTC, and IRS all assert regulatory control over cryptocurrency under certain circumstances. For the SEC, a given cryptocurrency must qualify as a security, or the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. The SEC developed its application of this test to cryptocurrency in its now-famous report on The DAO, a German crypto ecosystem.
The CFTC also has authority to regulate crypto as a commodity in accordance with the Commodity Exchange Act. The CFTC has recently stated that crypto enforcement is a top priority because of its high risks for investor fraud.