The Securities and Exchange Commission announced Tuesday that it has seized the assets of a “scam” that claimed to raise $600 million as part of an “initial coin offering.”
The regulators’ action comes just days after top regulators warned investors that they are watching closely for the possibility of fraud and scams in the rush toward cryptocurrencies like bitcoin and ethereum.
In this case, a Dallas-based company, AriseBank, purported to be both a federally-insured bank and to offer customers banking services in hundreds of cryptocurrencies. The venture raised money via an initial coin offering, or ICO, promoted on social media and by celebrity endorsers.
But regulators allege that the venture is a fraud and that it doesn’t have Federal Deposit Insurance Corp. insurance. They seized cryptocurrencies held by AriseBank, including bitcoin, litecoin, bitshares, dogecoin, and bitUSD.
“Attempting to conceal what we allege to be fraudulent securities offerings under the veneer of technological terms like ‘ICO’ or ‘cryptocurrency’ will not escape the commission’s oversight or its efforts to protect investors,” said Shamoil Shipchandler, director of the SEC’s Fort Worth office.
Tuesday’s announcement is a first for oversight of cryptocurrencies in that the SEC took over the company and put it into receivership, allowing for its assets to be sold off and money returned to people who invested in it through the ICO.
