The Securities and Exchange Commission (SEC) recently announced that it obtained a court order halting an allegedly fraudulent initial coin offering (ICO) by Dallas-based AriseBank targeting retail investors.
An ICO is a trendy way for companies to raise capital by distributing cryptocurrency tokens to investors in exchange for cash. According to the SEC, AriseBank used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months. The endorsement came from four-time boxing heavyweight champion Evander Holyfield. Both Holyfield and AriseBank spread word of the offering via social media and other mediums. The SEC alleges that AriseBank falsely stated that it had purchased an FDIC-insured bank which enabled it to offer customers FDIC-insured accounts and that it also offered customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies. AriseBank also allegedly failed to disclose the criminal background of key executives and misrepresented itself as a first-of-its-kind decentralized bank offering its own cryptocurrency to be used for a broad range of customer products and services. As a result, the SEC sought an emergency asset freeze to prevent investors from being victimized by what it claimed is an outright scam. Athletes and entertainers are approached daily to endorse all sorts of businesses, products and services. No matter the industry, the importance of hiring qualified people to do the proper diligence can never be understated. The impact of having your name and brand associated with something that ends up in the news for all the wrong reasons can have lasting monetary and reputational impacts.
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