The Rising Tide of Regulatory Enforcement in Cryptocurrency MarketsDate Written: December 29 2018 Written By: Samantha Joule Fow
Cryptocurrency has ignited a FinTech revolution that’s sweeping across not only financial markets, but also burning through a suite of professional services and regulated industries. But while revolutions tend to bring needed change to stale political, social, and economic circumstances, they also bring chaos. And, more often than not, where chaos is sewn opportunists quickly follow.
While the public is excited about the potential benefits of secure, transparent, decentralized digital currencies, they’ve also been subjected to frauds and schemes that have cost crypto markets billions. Cybercrimes, scams, and frauds run rampant through the crypto market, and they threaten the long-term security of cryptocurrency markets. In response, policy makers around the world have started to create and enforce rules regarding the use of cryptocurrency and blockchain technology.
AriseBank: a Cautionary Tale
The U.S. Securities Exchange and Commission has spent most of 2018 cracking down on illicit and fraudulent investment in the cryptocurrency market. And there’s no doubt about it: they mean business. Anyone skeptical of this fact need look no further than the case of AriseBank, a fraudulent cryptocurrency-based bank that attracted the attention of the SEC back in 2017.
The young CEO was offering investors FDIC-insured accounts and banking services, that included Visa brand of debit and credit cards, through AriseBank. It was later discovered that the blockchain start-up has not entered into any kind of partnership or affiliation with Visa that would have allowed AriseBank to offer Visa products. In fact, AriseBank was also not even authorized to conduct in banking in Texas nor was the company FDIC insured as it had claimed.
U.S. SEC Works to Safeguard Investors in the Crypto Market
After he was charged for defrauding his investors out of over $4 million, AriseBank CEO Jared Rice has been scrutinized under a microscope. The SEC’s handling of AriseBank and its two co-founders will set informative precedent for the handling of these cases in the future. The tale is meant to be a cautionary one for any participants in the decentralized grass-roots investment environment that sprouted up around cryptocurrency and blockchain tech.
Crypto Crimes Bring Serious Penalties
The SEC is bringing down the hammer on AriseBank and its co-founders, and Jared Rice is facing a real likelihood of a lifetime in prison. As charged, Jared Rice’s financial felonies have piled up to over a century of potential jailtime. And while some may consider this a harsh penalty for a white-collar offense, the SEC is working to deter others who would defraud investors in the growing cryptocurrency and blockchain space. And lest we forget, people begin to do desperate and dangerous things when they become consumed by greed and fear.
Jared Rice faces the music, he is looking at being charged with three counts of fraud and another three counts of securities fraud. On top of the fraud charges, Rice was also indicted for felony assault and destruction of evidence. Adding these crimes to his criminal history, which includes number of felony charges, Jared Rice will most likely not see much by way of generosity when it comes to sentencing.
This harsh law enforcement strategy may seem draconian, but it’s meant to deter the type of financial crimes that have plagued cryptocurrency markets since their inception. Unless cryptocurrency and blockchain tech companies can learn to effectively self-regulate, we’re sure to see more enforcement actions like the AriseBank case in the near future.