On January 25, 2018, the SEC filed a sealed civil Complaint in federal court in Dallas against AriseBank and its founders. The Complaint alleged that the defendants had committed securities fraud in raising more than $600 million in an initial coin offering ("ICO") of AriseCoin, starting in December 2017. The SEC immediately made a series of rapid legal moves designed to gain control of AriseBank and its assets.
Just one day after the filing of the new case, the Court had already appointed a receiver at the request of the SEC. The chosen receiver is a private attorney from the law firm Jones Day, and on January 26, with Court approval, he hired other lawyers at his firm to represent him. His motion states that they will cap their fees at $125,000 for the first 30 days.
On the same day, again with Court approval, the receiver hired Kroll Cyber Security as his forensic vendor. The motion states that Kroll's scope of work includes "[i]dentifying and imaging devices that might contain virtual wallets, keys, PINs, and passwords" and "[l]ocating cloud computing accounts, which might also contain virtual wallets or currencies." An important job, from the perspective of someone who bought AriseCoin and may be hoping for their money back.
All of this happened before the case was "unsealed" on January 29, making it available to the public for the first time.
This cryptocurrency-related emergency action by the SEC and receivership are the first of their kind. It is also interesting that in addition to cooperating with the FBI, U.S. Attorney's Office, FDIC, USPTO, and Texas Department of Banking, the SEC chose to chase the assets of AriseBank through the appointment of a private attorney, his law firm, and his chosen vendor. It remains to be seen how this playbook works out, and whether the quick, concerted strike is able to secure the currencies paid by people who bought AriseCoin.
Regardless, it is striking how quickly the SEC moved. AriseBank's promotion started in November 2017. Their public sale began December 26, 2017. One month later, the SEC was locked and loaded with a sealed federal Complaint, a private receiver, legal and forensic service providers, and – presumably – a plan in place to gain access to as much of the assets of AriseBank as possible.
They came for AriseBank quickly and in secret, and the public only found out about it three days later, when the record was unsealed. Watch out for further developments, as this case is bound to capture a great deal of attention and shed light on the SEC's enforcement regime in the ICO space.
KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.
© 2021 Keating Muething & Klekamp PLL. All Rights Reserved
- Class Action Litigation
- Cybersecurity and Privacy Law
- Data Breach
- Securities Law
- Supreme Court
- Sixth Circuit
- Intellectual Property
- Social Media
- Trademark Litigation
- Initial Coin Offering
- Bet-the-Company Litigation
- E-Discovery Case Law
- Electronic Data Discovery
- Federal Rules of Civil Procedure
- Employment Law
- Workplace Accommodations
- Employer Policies
- Labor & Employment Law
- Labor Law
- General Data Protection Regulation
- Securities Litigation
- Stock Drop
- Cybersecurity Regulation
- Drug Enforcement Agency
- Medical Marijuana
- Ohio Foreclosure Reform
- Craft Brewing
- Copyright Law
- Environmental Law
- Fair Housing Act
- Health Care Act
- Healthcare Reform
- Pregnancy Discrimination
- Religion Discrimination
- Seventh Circuit
- Electronically Stored Information
- Americans with Disabilities Act
- Cyber Insurance
- Business Process Improvement
- Employment Litigation
- Receivership Statute
- Employer Handbook
- Employer Rules
- National Labor Relations Act
- National Labor Relations Board
- E-Discovery Project Plan
- Predictive Coding
- TAR ( Technology Assisted Review)
- Quality Representation
- Land Use & Zoning
- Statute of Limitations
- Construction Litigation
- Federal Rule
- TransUnion LLC v. Ramirez and the Impact on Class Action Litigation
- Questioning the Questionnaires: New PPP-Related Litigation Raises Issues for Borrowers
- "You Don't Have to Go Home But You Can't Stay Here": Updates to Ohio and Kentucky’s COVID-19 Orders Impacting Bars & Restaurants
- Kentucky Restaurants Begin Opening with Limited Capacity Amid COVID-19 Epidemic
- Ohio Restaurants and Bars Begin Soft Openings for Diners Amid COVID-19 Epidemic
- Supreme Court Sidesteps “Cy Pres” Challenge
- Golfers, New and Old - Be Careful!
- "Aloha Poke": Social Media and Consumer Perception are Part of the Trademark Enforcement Equation
- GDPR: Less Than 100 Day and Counting to "G-Day" - Here's What You Need to Know
- Rapid SEC Action Against AriseBank Reveals New Playbook For Allegedly Fraudulent ICOs