AriseBank was running an initial coin offering, selling its virtual currency to investors for $1.20 to $1.40 a coin. The startup agreed to pay Holyfield 2.5 million AriseCoins, with an expected value of $3 million, according to former AriseBank CEO Jared Rice. It would have been one of Holyfield’s biggest paydays since the heyday of his boxing career in the late 1990s. A spokesperson for Evander Holyfield declined to comment. Now it seems that the value of those magic coins has vanished.
On Friday, January 26, federal agents brandishing firearms raided Rice’s East Dallas home and seized his computers and cellphones, Rice says. A few days later, the SEC announced it had halted AriseCoin’s ICO and frozen the assets of AriseBank, Jared Rice and Stanley Ford, AriseBank’s cofounder. It’s one of the largest U.S. interventions so far into the raising of money for virtual currency sales.
For anyone with access to Google who had bothered to look closely, AriseBank was an ICO that had all the red flags of a scam, including a celebrity endorsement, which was highly discouraged by the SEC in November 2017. By mid-January, AriseBank claimed it had raised $600 million, but few industry insiders had ever heard of it. AriseBank had made a big announcement about its acquisition of a 100-year-old, FDIC-insured bank, but later the company admitted the statement was a fabrication.
Former CEO Rice, 29, admits that he all but expected the Feds to shut his operation down.
“I said this to every single person I worked on this project with—they’re going to come,” Rice says today. “I didn’t know they were going to come so soon, but I knew they would.”
Rice’s story is a cautionary tale for investors rushing into cryptocurrency ICOs without bothering to perform even cursory due diligence.
Ever since Rice dropped out of the Dallas Christian High School in 2005 at age 17, he has been on a mission to make it big. His first endeavor was TexasMixTapes.com, a website where users could download rap artists’ tapes and read artist profiles.
“It was a huge site, it was massive,” says Rice, who has a penchant for telling long stories and making grandiose statements. “Dallas’ rap scene wasn’t anything until that website was launched.”
The site didn’t bring in any revenue, but Rice says he paid the bills by building websites for rappers. One of his first big jobs according to his LinkedIn profile was “Head of Web Development” at Pixar Animation Studios in 2007. Yet a closer reading reveals that he was only a freelancer who assisted one of the company’s business partners for three months. When Forbes called Pixar, a spokesperson said the company had no record of Rice ever being an employee.
Rice’s CV paints him as a serial entrepreneur who launched a half-dozen other web-based businesses, ranging from a kid-targeted search engine that filtered out inappropriate content to a company that developed mobile sites for law firms and a cloud-computing startup. It also claims he was awarded a patent in 2012 for a technology called “IPSaaS,” but a search on the U.S. Patent Office’s website reveals no patents for IPSaaS or any in Jared Rice’s name.
None of Rice’s startups made much money or gained traction, and all of them eventually shut down. According to Rice, his marketing agency, Dotoji, which was based in his house, was his most successful. In fact, on the cover of his forthcoming book, “From Trap Houses to Penthouses: My Journey From Gangs, Drugs & Pimps To Building A Global Internet Empire,” Rice says Dotoji was named “an ‘Inc500’ fastest growing company.” But a representative from Inc. magazine told Forbes that Dotoji has never been named to any of its lists or received any awards.
In 2016, Rice got turned on to cryptocurrencies and had the idea to start a “people’s bank,” essentially a cryptocurrency exchange with no central authority running it. He borrowed the code from a network called BitShares to start building AriseBank’s own blockchain.
Rice’s marketing plan was heavy on hype but scant on details: he paid Evander Holyfield to promote AriseBank, did a couple of YouTube interviews and seeded a few media articles. One person he recruited to work on the project said she was impressed by his knowledge of cryptocurrencies and called him a “visionary.” Rice told her inspiring-sounding stories of his upbringing, such as the time when he chose to hang out with drug dealers so he could get access to WiFi. When Forbes asked why he couldn’t have just used a public library, Rice responded, “Well, I was already in the hip-hop industry. You have to have a place to sleep, right? There’s many guys like me who came from nothing and became something.”
On January 18, AriseBank issued a big press release. “AriseBank now holds 100 percent of the equity in both KFMC Bank Holding Company, a 100 year-old commercial bank, and TPBG, a 25 year-old investment banking and management firm,” read the statement. “AriseBank can now offer its customers FDIC-insured accounts and transactions.” It also said AriseBank had raised “an astounding $600 million” in its ICO in the span of just a few weeks.
There were baffling problems with those statements. “FDIC records show that neither AriseBank nor the commercial bank it allegedly purchased has ever been an insured depository institution,” read the SEC complaint released January 30. And no deal had even been done—Rice had only been in talks to make acquisitions, he now says. He adds that he had hired New York-based Eff Creative to write the press release, and he blindly approved it without even reading it. (Eff Creative did not respond to requests for comment.) AriseBank issued another press release a full week later to correct the mistake.
Then there was the issue of the ICO. AriseBank claimed to have raised $600 million, but none of the industry experts Forbes spoke with had heard of it. “If someone has raised $600 million in this market, people would know. Everybody would hear about it. I think that’s a bald-faced lie,” says Greg Murphy, a partner at blockchain technology-focused venture capital firm Outlier. Rice, although he was CEO, incredibly claims he doesn’t know how much was raised. “I was so busy coding,” he says. He adds that he had spent under $100,000 of the money raised in the ICO on software development, computers, phones, public relations and lawyers.
The SEC ultimately intervened, citing AriseBank’s failure to register its ICO as a security and for making numerous false statements. Lawyers only recovered “a couple million” in assets when they froze the accounts, according to the Wall Street Journal.
“How many times in history has the government made regulations and people fought them?” counters Rice, waving his crypto-libertarian flag. “We felt that the government doesn’t understand blockchain or cryptocurrency.” Rice plans to fight the SEC and claims that AriseBank investors have pledged $250,000 to contest the ruling. “If I screwed investors, they wouldn’t be paying for my attorney,” he says.
He is currently on probation and denies stealing any of the millions he’s accused of taking. “All I ever earned out of this were a couple of pairs of underwear, pants, and a couple of shirts so I could wear them to meetings, maybe a few meals here and there, and a place to stay so I could get all this work done,” says Rice, defiant as ever. “If that’s why they want to crucify me, then go ahead.”