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The US Securities and Exchange Commission (SEC) has secured a court order allowing it to block the initial coin offering (ICO) of AriseBank, which claims to be the first decentralized bank in the world. The regulator is calling it a scam and questions some of the methods used to raise funds.

The SEC said in a press release it filed a complaint in a Dallas federal district court last Thursday to block AriseBank’s ICO. The complaint, which was unsealed at the start of this week, claims that the company used social media, a celebrity endorsement (from retired boxer Evander Holyfield) and other marketing tricks to raise $600 million of its $1 billion target in only two months. AriseBank’s assets have been frozen following the court approval.

The SEC accuses AriseBank of falsely claiming to have acquired an FDIC-insured bank, which allowed it to provide clients with FDIC-insured accounts. The complaint also states the company allowed clients to get an AriseBank-branded VISA card to use some 700 cryptocoins. Besides, AriseBank purportedly hid the criminal background of its top executives.

AriseBank and its co-founders, Jared Rice Sr. and Stanley Ford, allegedly sold unregistered investments in the form of “AriseCoin” cryptocurrency - a digital token used by AriseBank clients. AriseBank claimed that it could create an algorithmic trading app that trades cryptocoins automatically.

Stephanie Avakian, co-director of the SEC’s Enforcement Division, said:

“We allege that AriseBank and its principals sought to raise hundreds of millions from investors by misrepresenting the company as a first-of-its-kind decentralized bank offering its own cryptocurrency to be used for a broad range of customer products and services. We sought emergency relief to prevent investors from being victimized by what we allege to be an outright scam.”

Steven Peikin, co-director of the SEC’s Enforcement Division, said this was the first time the agency had resorted to appointing a receiver in relation to an ICO scam.

AriseBank’s ICO started on December 26, 2017, and was expected to end last Saturday, with distribution to investors on February 10. The SEC will try to enforce the recuperation of ill-gotten gains, impose penalties, and prohibit Rice and Ford from running a public company in the future.

It seems that AriseBank conducted its ICO on popular crypto platform BitShares. According to Galen Moore from Token Report, public records on BitShares demonstrate that AriseBank’s initial coin “wallet” collected approximately $1.1 million.

Those who invested in AriseCoin and believe they may be a victim can report it to the SEC.

Due to the rising number of scams, Facebook announced yesterday it was banning ads related to ICOs, cryptocurrencies, and binary options.