SEC v. ARISEBANK, No. 3:18-cv-186, Northern District of Texas (Mar. 29, 2018)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
________________________________________________
SECURITIES AND EXCHANGE COMMISSION, §
        §
 Plaintiff,      §
        §
vs.        §
        §
ARISEBANK,       § Civil Action No.: 3:18-cv-186-M
JARED RICE SR., and      §
STANLEY FORD,          §
        §
Defendants.         §
_______________________________________________ §

FIRST AMENDED COMPLAINT

 Plaintiff  Securities  and  Exchange  Commission  (the "SEC")  files  this  First  Amended
Complaint against Defendants AriseBank, co-founder/CEO Jared Rice Sr., and co-founder/COO
Stanley Ford (collectively "Defendants") and alleges the following:
SUMMARY

1. The SEC files this action to halt an ongoing, fraudulent, and unregistered offering
of securities and to protect investors who are being actively defrauded.
2. The  fraud  is  being  carried  out  by  Defendants  Jared  Rice  Sr.  and  Stanley  Ford
through Defendant AriseBank.  AriseBank purports to be the world's first "decentralized" bank,
allegedly offering  a  variety  of  consumer-facing  banking  products  and  services  and supporting
more  than  700  different  virtual  currencies.    Claiming  to  be  "one  of  the  largest  cryptocurrency
platforms  ever  built,"  AriseBank  says  it  is  "focused  on  bringing  cryptocurrency  to  the  average
consumer and using it to revolutionize banking."
3. AriseBank  began  raising  money  at  least  as  early  as  November  2017,  through  a
securities  offering  of  AriseCoin—its  own  digital  currency.    AriseCoin  is  being  offered  in    an

SEC v. AriseBank, et al.
First Amended Complaint   Page 2
initial coin offering ("ICO") through which AriseBank claims that it has raised more than $600
million, with a goal of $1 billion.  The ICO is scheduled to conclude on January 27, 2018, with
AriseCoin to be distributed to investors on February 10, 2018.
4. The  ICO  is  an  illegal  offering  of  securities  because  there  is  no  registration
statement filed or in effect with the SEC, nor is there an applicable exemption from registration.
The  AriseCoin  ICO  is a  general  solicitation  that  uses statements  posted  on  the  Internet  and
distributed throughout the world—including the United States.  These marketing efforts include
statements  made  through  websites  the  Defendants  control  and  through  various  social  media
accounts, video and radio interviews, and even a celebrity endorsement.
5. The ICO offering materials use many materially false statements and omissions to
induce investment in the ICO.  For example, AriseBank announced in a recent press release that
it  has  purchased  a  100-year-old  commercial bank.    The  release  stated  that  with  the  acquisition,
AriseBank "can  now  offer  its  customers  FDIC-insured  accounts  and  transactions  .  .  .  ."    This
claim is false.  FDIC records show that neither AriseBank nor the commercial bank it allegedly
purchased has  ever  been  an  insured  depository  institution  under  the  Federal  Deposit  Insurance
Act.
6. The  Defendants  also  made  false  statements  about  AriseBank's  association  with  a
payments  processing  platform  through  which  AriseBank  claims  to  offer  an  AriseBank-branded
VISA card.    Finally,  the  Defendants  made  materially  false  statements  and  omissions  about  the
backgrounds  and  qualifications  of  key  executives—most  notably  by  failing  to  disclose  Rice's
criminal background.
7. By   engaging   in   the   conduct   described   in   this   First   Amended   Complaint,
Defendants  have committed,  and  unless  restrained  and enjoined  will  continue  to  commit,

SEC v. AriseBank, et al.
First Amended Complaint   Page 3
violations of the registration and antifraud provisions of the federal securities laws.  Because of
the  ongoing  nature  of  the  fraudulent  offering  and  risk  of  asset dissipation,  the SEC  seeks
emergency relief—including temporary restraining orders, asset freezes, and the appointment of
a receiver over AriseBank.
I.
DEFENDANTS

8. AriseBank   (a/k/a   AriseBank   Ltd   and   AriseBank   Foundation,   LLC)   is   an
unincorporated entity with its principal place of business in Dallas, Texas.
9. Jared Rice Sr., age 29, is believed to be a resident of Dallas, Texas and is the CEO
and co-founder of AriseBank.
10. Stanley  Ford,  age  45,  purports  to  reside  in  Dubai,  U.A.E,  but  has  also  resided  in
Dallas, Texas.  He is the co-founder and Chief Operating Officer of AriseBank.
II.
JURISDICTION AND VENUE

11. The SEC brings this action under Securities Act Section 20(b) [15 U.S.C. §
77t(b)] and Exchange Act Section 21(d) [15 U.S.C. § 78u(d)], seeking to restrain and enjoin the
Defendants temporarily, preliminarily, and permanently from engaging in such acts and practices
as alleged herein.
12. This Court has jurisdiction over this action under Securities Act Section 22(a) [15
U.S.C. § 77v(a)] and Exchange Act Sections 21(e) and 27 [15 U.S.C. §§ 78u(e) and 78aa].  Each
of the investments offered and sold as described in this First Amended Complaint is an
investment contract and, therefore, a "security" as that term is defined under Securities Act
Section 2(a)(1) [15 U.S. C. § 77b(a)(1)] and Exchange Act Section 3(a)(10) [5 U.S. C. §
78c(a)(10)].

SEC v. AriseBank, et al.
First Amended Complaint   Page 4
13. AriseBank, Rice, and Ford, directly and indirectly, made use of the mails or of the
means and instrumentalities of interstate commerce in connection with the transactions, acts,
practices, and courses of business described in this First Amended Complaint.
14. Venue  is  proper  because  transactions,  acts,  practices,  and  courses  of  business
described in this First Amended Complaint occurred within this federal district.
III.
FACTUAL ALLEGATIONS

A. B
ACKGROUND ON DIGITAL TOKENS OR COINS
15. An  ICO  is  a  fundraising  event  in  which  an  entity  offers  participants  a  unique
"coin" or "token" in exchange for consideration (often in the form of crypto or fiat currency).
16. The tokens are issued on a "blockchain" or cryptographically secured ledger.
1

17. Generally, coins or tokens may entitle holders to certain rights related to a venture
underlying  the  ICO,  such  as  rights  to  profits,  shares  of  assets,  rights  to  use  certain  services
provided by the issuer, and/or voting rights.  These coins or tokens may also be listed on online
platforms,  often  called  virtual  currency  exchanges,   and  tradable  for  crypto  or  fiat  currency.
Often, the coins or tokens are immediately tradable.
18. ICOs  are  typically  announced  and  promoted  through  public  online  channels.

1
  A blockchain is a type of distributed ledger, or peer-to-peer database spread across a network,
that records all transactions in the network in theoretically unchangeable, digitally-recorded data packages
called blocks.  Each block contains a batch of records of transactions, including a timestamp and a
reference to the previous block, linking the blocks together in a chain.  The system relies on cryptographic
techniques for secure recording of transactions.  A blockchain can be shared and accessed by anyone with
appropriate permissions.   The Bitcoin blockchain is an example of a "non-permissioned," or public and
open access blockchain.  Anyone can download the Bitcoin open-source software and join.  All
participants share a single view of the Bitcoin blockchain, which is updated when Bitcoin network
participants reach a consensus on the validity of transactions under review.   "Permissioned" or private
blockchains are modifications to that model and require permissioned servers to be approved to
participate on the network or to access particular information on the blockchain.  Blockchains or
distributed ledgers can also record what are called smart contracts, which essentially are computer
programs designed to execute the terms of a contract when certain triggering conditions are met.

SEC v. AriseBank, et al.
First Amended Complaint   Page 5
Issuers  usually  release  a  "whitepaper"  describing  the  project  and  the  terms  of  the  ICO.    To
participate,  investors  are  generally  required  to  transfer  funds  to  the  issuer's  address,  online
wallet, payment  processor,  or  other  account.  After  the  completion  of  the  ICO,  the  issuer  will
distribute its unique coin or token to the participants' unique address on the blockchain.
19. In  some  instances,  the  coins  or  tokens  may  continue  to  be  sold  by  the  original
issuer after the ICO has completed.  In others, they may only be obtained by purchasing them on
secondary markets.
B. D
EFENDANTS BEGIN MARKETING THE ICO
20. On  its  website,  www.arisebank.com,
2
  AriseBank claims  that  it  was  founded  in
March  2017  by  Rice  and  Ford.    The  company's  initial  plan  was  announced,  and  development
began,  in  June  2017.    In  October  2017,  AriseBank  claims  to  have  launched  the  AriseCoin  ICO
and  a  beta  version  of  the  banking  platform.    Although  Defendants  hold  AriseBank  out  as  a
banking  platform,  on  January  5,  2018,  the  Texas  Department  of  Banking  issued  an  Order  to
Cease  and  Desist  Activity,  prohibiting  Defendants  and  their  affiliates  from  implying  that  they
engage in the business of banking in Texas.
21. In or around October 2017, AriseBank issued an "Elevator Whitepaper," which is
an abridged offering document authored and signed by Rice.  The Elevator Whitepaper describes
the  AriseBank  products  in  development  and  AriseBank's  leadership  team,  and  discusses a  few
pages  about  the  AriseCoin  ICO.    AriseBank  also  distributed  one  or  more  versions  of  a  longer
Developer Whitepaper, signed by Rice and Ford, in November and December of 2017.
22. AriseBank touts the AriseCoin ICO as the largest ICO ever launched.  AriseBank
claims  that  it  completed  its  initial  "Private  Sale"  of  the  ICO  in  two  days  in  November  2017,

2
 Defendants also used the website www.arisecoin.com.

SEC v. AriseBank, et al.
First Amended Complaint   Page 6
raising  $1 million.    After  the  Private  Sale,  AriseBank  purportedly  ran  a  Presale  of  the  ICO,
which it says raised $410 million by December 26, 2017.
23. The ongoing Public Sale began on or around December 26, 2017 and is set to last
until January 27, 2018.  AriseBank's website indicates that it will seek to raise as much as $500
million during the public sale.  On January 18, AriseBank claimed in a press release that it had
raised $600 million.
24. The arisecoin.com contribution page allows investors to purchase AriseCoin with
U.S.  dollars  and  a  variety  of  virtual  currencies,  including  Ethereum  (ETH),  Bitcoin  (BTC),
Litecoin   (LTC),   Dogecoin   (DOGE),   and   NEM   (XEM).      The   website   does   not   prohibit
investments from U.S. citizens or make any assessment of an investor's accreditation.
25. AriseBank lists the price of its AriseCoin, which it also refers to as ACO, as $1.40
per AriseCoin with  833,333,333  available  to  acquire.    The  price  under  the  Presale  was  $1.20,
with a 75 AriseCoin minimum purchase.
26. As a  key  part  of  its  sales  pitch,  AriseBank  claims  that  it  has  developed  an
algorithmic  trading  application,  which  it  calls  aIExchanger,  that  automatically  makes  trades  in
various  cryptocurrencies.    AriseBank  alleges that aIExchanger  will  automatically  make  trades
with funds in AriseBank customer accounts, generating daily profits.  A portion of these profits
will  be  paid  to  AriseCoin  holders  on  a  daily  basis  in  the  form  of  eACO.    AriseBank  describes
eACO as a separate cryptocurrency from AriseCoin, and AriseBank touts it as the first expiring
cryptocurrency: after receiving eACO, its holders have a limited period of time to spend it before
it automatically expires.  AriseBank claims that this forced circulation will increase the value of
AriseCoin.  AriseBank also takes a portion of the daily aIExchanger profits as a "broker fee."
27. In  discussing  how  AriseBank  will drive  the  increase  of  value  of  AriseCoin,  the

SEC v. AriseBank, et al.
First Amended Complaint   Page 7
Developer Whitepaper states:
Our goal with AriseCoin is to drive overall circulation by incentivizing ACO holders
to  spend  their  extra  rewarded  eACO  bonus  coins  before  they  expire.  This  causes
eACO currency to be used rather than just held in static accounts, which in turns [sic]
drives and grows the market value of AriseCoin economy and thus increase [sic] the
value of ACO holdings.
...
AriseCoin  works  directly  with  the  AriseBank  Platform.    In  fact,  they  both  work in
concert with one another.  AriseCoin is minted daily, based on the total gains from all
AriseBank   bank   accounts.      Those   minted   AriseCoins   are   then   automatically
distributed  to  AriseCoin  wallet  holders  around  the  world,  creating  truly  organic
circulation,  while  also  creating  wealth  distribution  to  everyone  who's  a  part  of  the
AriseCoin community.

And  elsewhere  it states  that  "eACO  are  minted  on  a  daily  basis,  in  proportion  to  the
collective  gains  of  AriseBank  customers  and  are  then  algorithmically  distributed  back  to  all
AriseCoin holders."

C. D
EFENDANTS FAIL TO REGISTER THE ARISECOIN ICO WITH THE SEC
28. Federal  securities  laws  require  that  companies  disclose  financial  information
through  the  registration  of  securities  with  the  SEC.    This  information  allows  investors  to  make
informed judgments about whether to purchase a company's securities.
29. The AriseCoin ICO is an offering of securities, which must be registered with the
SEC unless an exemption applies.  No such exemption applies here.
30. Neither AriseBank nor its AriseCoin are registered with the SEC in any way.
31. For  the  purpose  of  applicable  exemptions,  AriseBank's  offering  of  AriseCoin
through the AriseCoin ICO was not limited by size, geography, number of investors, or investor
accreditation status.
32. Rice has made statements falsely claiming that Defendants and AriseCoin are not
subject  to  regulation  by  the  SEC.    In  early  October  2017,  Rice  published  a  statement  on
Facebook  and  AriseBank.com,  described  in  part  as  "a  statement  on  our  fight  with  the  SEC."

SEC v. AriseBank, et al.
First Amended Complaint   Page 8
Rice explains in the post that companies sell digital assets such as tokens "to gain investment via
a self-established network of private investors."  After equating digital asset tokens with stock in
a  company,  Rice  mistakenly  remarks  that  "a  private  company  can  issue  private  stock  to
ANYONE who wants to invest in their company and/or products without the SEC's involvement
in any way."
3
  Rice declared that "[r]ather than close our ICOs and shiver in fear, companies like
AriseBank have geared up for the coming fight with the SEC."
D. D
EFENDANTS MAKE MATERIALLY FALSE   AND   MISLEADING STATEMENTS   AND
OMISSIONS
33. In addition to its failure to register the AriseCoin ICO, Defendants made false and
misleading  statements  and  omissions  in  its  whitepapers,  press  releases,  and  other  public
statements.
34. These  statements  and  omissions  were  made  in  connection  with  the  AriseCoin
ICO, and Defendants obtained money or property by means of these statements.  And they made
them knowingly, recklessly, or at a minimum negligently.
The Defendants Falsely Claim Purchase of an FDIC-Insured Bank
35. In December 2017, AriseBank announced it was acquiring a 100-year-old FDIC-
insured  bank,  with  "hundreds  of  banking  partnerships  across  the  world  and  many  certifications
and licenses."    AriseBank  continued  to  issue  press  releases  on  this  topic  through  January  18,
2018, when it announced that it had completed the acquisition "and now holds 100 percent of the
equity in both KFMC Bank Holding Company, a 100 year-old commercial bank."
36. AriseBank touted the importance of this purported acquisition: "With the addition

3
 In a private Facebook conversation, however, Rice stated: "[ICO] tokens are shares, in reality.  They
[sic] fall under the Hewy [sic] rules and the Hewy [sic] test.  [T]hey are [']investor contracts [sic][']."  He
also falsely claimed: "[T]he SEC sat me down last week and pre-audited us and the nerds got on my ass
and said... [f***] the FBI/ [f***] the SEC[.]"

SEC v. AriseBank, et al.
First Amended Complaint   Page 9
of the traditional bank[] AriseBank will now have an arm to comply with industry regulation and
give   its   customers   added   confidence   that   even   disruptive   banking   services   offering
cryptocurrencies  will  operate  with  the  same  assurance  and  consistency  as  those  of  a  traditional
bank.  As part of this acquisition, AriseBank can now offer its customers FDIC-insured accounts
and transactions."
37. As  each  Defendant  knew,  this  statement is false.    The  FDIC  has  no  record  that
either  AriseBank  or  KFMC  is  FDIC-insured.    Thus,  neither  may  offer,  or  claim  to  be  able  to
offer, FDIC-insured bank accounts.
38. The FDIC also has no record of any application for the change in ownership of an
FDIC-insured bank or bank holding company involving AriseBank, KFMC, Rice, or Ford.
The Defendants Falsely Claim to Offer an AriseBank-branded VISA Card
39. AriseBank's  Developer Whitepaper  claims  the  company  offers  an  AriseBank-
branded  VISA  card  that  allows  its customers  to  pay  for  goods  and  services  using  any  of  700
different  virtual  currencies  that  they  can  hold  in  their  AriseBank  account.    It  also  states  that
"Crypto in your Arise account is now instantly available on your AriseCard VISA."
40. AriseBank  makes  claims  about  the  specific  tools  it  uses  to  facilitate  these  cards.
In its Developer Whitepaper, AriseBank claims that it provides the VISA card through a service
named  Marqeta,  which  was  listed  on  its  website  as  a  "Partner":  "Powered  by  Marqueta  (sic)  –
AriseBank  utilizes  Marqueta's  (sic)  world  renowned  VISA  API,  allowing  us  to  do  things  that
most crypto wallets who have VISA cards are unable to do."
41. On its Facebook page, AriseBank announced on October 4, 2017, that "[o]ur new
partnership with VISA and Marqeta has enabled the AriseCard and the entire AriseCard platform
to change the very foundation of how we spend our money.  From virtual to physical cards, the

SEC v. AriseBank, et al.
First Amended Complaint   Page 10
AriseCard platform is directly compatible with ...over 700 cryptocurrencies."
42. As each Defendant knew, AriseBank has no relationship with Marqeta.  And after
learning  of  these  claims,  Marqeta  sent  AriseBank  a  cease-and-desist  letter  and  made  public
statements  on  Twitter  that  it  did  not  have  any  relationship  with  AriseBank  and  did  not  provide
programs that permit the spending of cryptocurrency.
The Defendants Misled Investors About the Backgrounds of AriseBank Officers
43. On its website and Facebook page and in its whitepapers, AriseBank identifies its
executives  and  provides  brief  biographies  for  them.    These biographies tout  the  credentials  and
credibility of these executives.  They are misleading—omitting key information, including Rice's
criminal background.
44. For instance, the Defendants tout Rice in the Elevator Whitepaper as a "futurist[]
who envisioned  the  entire  Arise-Bank  and  AriseCoin  idea."    Rice  has  also  supposedly  made
"[y]ears of community contributions [. . .] contributing code under the MIT license."  And he has
supposedly performed "[y]ears of community work [. . .] working in the communities he made it
out of and giv[ing] back frequently with projects like Dotemy."
4

45. As  the  Defendants  knew  or  were  reckless  in  not  knowing,  Rice's  biography  was
materially misleading, since it hid from investors that:
• Rice  is  currently  on  probation  as  a  part  of  a  plea  deal  stemming  from  a  Collin
County, Texas felony indictment in November 2015 for theft and tampering with
government records.
• He is currently under felony indictment in Dallas County, Texas for assault,  after
which  he  allegedly  destroyed  evidence by  stealing the  victim’s  cell  phone  and
deleting an audio recording of the incident.
• He  is  the  subject  of  one  or  more  unpaid  civil  judgments  dating  back  to  at  least
2015.

4
 The other documents referenced in the previous paragraph contain similar statements about Rice.

SEC v. AriseBank, et al.
First Amended Complaint   Page 11
46. In short,  Rice  is  not  the  highly-competent  professional  and  community  activist
Defendants  held him  out  to  be.    The  undisclosed information—which  bears  directly  on  his
honesty,   professional  competence,  and  fair  dealing  as AriseBank's  CEO—would  have  been
highly  material  to  investors,   especially  allegations  concerning  stealing  and tampering  with
government  documents  and  destroying  evidence.    The  convictions  and/or  guilty  pleas  also
impact the Defendants'  ability  to  obtain  licenses  to  own  or  operate  financial  institutions  under
restrictions imposed by the FDIC.
47. Finally,  the  Defendants  lured  investors  into  the  scheme  by  distributing  false  or
misleading biographical information  about  Kelvin  Spencer,  who  they  held  out  as  AriseBank's
President.
5

48. Perhaps  most  notably,  Spencer  was  never  actively  involved  in  AriseBank's
operations.  Instead, Rice—who Spencer knew and trusted from his days growing up in Dallas—
fraudulently  used  Spencer's  name, likeness,  and  biography  to  mislead  investors  about  the
legitimacy of AriseBank.
49. For instance, in the Developer Whitepaper, the Defendants falsely stated:
• Kelvin  has  "worked  closely  with  the  CEO  and  founders  of  AriseBank  for  the  past
decade."    Spencer  did  not  work  with  Rice  for  the  past  decade  and  was  only  in
sporadic contact with him over that period.  And he has never met Stanley Ford, the
other Co-founder.
• Kelvin has "sold many lucrative software companies."  While Spencer has sold some
software programs, he has never sold a software company.
• Kelvin  has  "made  several  million  dollars  off  of  Bitcoin  and  Ethereum  assets,  by
creating his own auto-trading algorithm that he utilized on multiple trading exchanges

5
 The SEC's original Complaint contained the erroneous allegation that Spencer has a criminal history.
That is not the case.  Having filed this case on an emergency basis, ex parte and under seal, SEC counsel
first realized the error by speaking with Spencer after the case was unsealed. Upon speaking with him,
SEC counsel determined that the prior criminal conduct alleged in the original complaint relates to
another person with the same name and similar identifying characteristics.  SEC counsel greatly
appreciates Mr. Spencer's assistance in correcting its mistake and apologizes to him for it.

SEC v. AriseBank, et al.
First Amended Complaint   Page 12
like  GDax."    While Spencer wrote  some  programs  to  trade  cryptocurrencies  in  his
free time, he has not made significant profits trading—much less millions of dollars.
• "Kelvin [. . .] works day to day with the CEO and COO to bring new products and
partnerships."    Spencer  did  not  work  day  to  day  with  Rice  or  Ford,  nor  was  he
involved in new products or partnerships.
• "Kelvin [. . .] will head the aEX and aiExchanger."  Spencer never did any work
on aEX or aiExchanger.
• "Kelvin [. . .] is helping to grow one of the best blockchain developer teams in the
industry."  Spencer did not have a blockchain developer team.

IV.
CLAIMS FOR RELIEF

FIRST CLAIM FOR RELIEF
Unregistered Offers and Sales of Securities
Violation of Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and (c)]
(All Defendants)

50. The SEC  incorporates  the  allegations  in  paragraphs  1  through  46 of  this  First
Amended Complaint by reference as if set forth verbatim in this Claim.
51. By  engaging  in  the  conduct  described  above,  Defendants,  directly  or  indirectly,
singly  or  in  concert  with  others,  (i)  made  use  of  means  or  instruments  of  transportation  or
communication  in  interstate  commerce  or  of  the  mails  to  sell,  through  the  use  or  medium  of
written  contracts,  offering  documents,  prospectus,  oral  and  written  statements,  or  otherwise,
securities  as  to  which  no  registration  statement  was  in  effect;  (ii)  for  the  purpose  of  sale  or
delivery after sale, carried or caused to be carried through the mails or in interstate commerce, by
means  or  instruments  of  transportation,  securities  as  to  which  no  registration  statement  was  in
effect; or (iii) made use of means or instruments of transportation or communication in interstate
commerce or of the mails to offer to sell or offer to buy, through the use or medium of written
contracts, offering documents, prospectus, oral and written statements, or otherwise, securities as
to which no registration statement had been filed.
52. For these  reasons,  Defendants  have  violated,  and  unless  restrained  and  enjoined,

SEC v. AriseBank, et al.
First Amended Complaint   Page 13
they will continue to violate Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and
(c)].
SECOND CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities in
Violation of Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)]
(All Defendants)

53. The SEC re-alleges and incorporates paragraphs 1 through 46 of this
First Amended Complaint by reference as if set forth verbatim in this Claim.
54. By  engaging  in  the  conduct  described  above,  Defendants  directly  or  indirectly,
singly  or  in  concert  with  others,  in  the  offer  or  sale  of  securities,  by  use  of  the  means  and
instrumentalities  of  interstate  commerce  or  by  use  of  the  mails,   and  at  least  negligently,  have
obtained money or property by means of untrue statements of a material fact and omitted to state
a  material  fact  necessary  in  order  to  make  the  statements  made,  in  light  of  the  circumstances
under which they were made, not misleading.
55. Defendants knew or should have known that they obtained money or property by
means  of  untrue  statements  of  a  material  fact  and  omitted  to  state  a  material  fact  necessary  in
order  to  make  the  statements  made,  in  light  of  the  circumstances  under  which  they  were  made,
not misleading.
56. For these reasons, Defendants have violated and, unless enjoined, will continue to
violate Securities Act Section 17(a)(2) [15 U.S.C. § 77q(a)(2)].
THIRD CLAIM FOR RELIEF
Fraud in Connection With the Purchase and Sale of Securities
Violation of Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder
[15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5(b)]
(All Defendants)

57. The  SEC  re-alleges  and  incorporates  paragraphs  1  through  46 of  this  First
Amended Complaint by reference as if set forth verbatim in this Claim.

SEC v. AriseBank, et al.
First Amended Complaint   Page 14
58. By  engaging  in  the  conduct  described  above,  Defendants,  directly  or  indirectly,
singly or in concert with others, in connection with the purchase or sale of securities, by use of
the means and instrumentalities of interstate commerce or by use of the mails,  have made untrue
statements of a material fact and omitted to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading.
59. Defendants   made   the   above-referenced   untrue   and   misleading   statements
knowingly or with severe recklessness.
60. For  these  reasons,  Defendants  violated  and,  unless  enjoined,  will  continue  to
violate  Exchange  Act  Section  10(b)  [15  U.S.C.  §  78j(b)]  and  Rule  10b-5(b) [17  C.F.R.  §
240.10b-5(b)].
FOURTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Sections 5(a) and (c) and 17(a)(2) of the Securities Act
and Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder
(Rice and Ford)

61. The  SEC  re-alleges  and  incorporates  paragraphs  1  through  46 of  this  First
Amended Complaint by reference as if set forth verbatim in this Claim.
62. By   engaging   in   the   conduct   described   above,   Defendants   Rice   and   Ford
knowingly  or  recklessly  aided  and  abetted,  pursuant  to  Section  15(b)  of  the  Securities  Act  and
Section 20(e) of the Exchange Act:
• (i) the use of means or instruments of transportation or communication in
interstate commerce or of the mails to sell, through the use or medium of
written   contracts,   offering   documents,   prospectus,   oral   and   written
statements,  or  otherwise,  securities  as  to  which  no  registration  statement
was  in  effect;  (ii)  for  the  purpose  of  sale  or  delivery  after  sale,  carried  or
caused to be carried through the mails or in interstate commerce, by means

SEC v. AriseBank, et al.
First Amended Complaint   Page 15
or  instruments  of  transportation,  securities  as  to  which  no  registration
statement   was   in   effect;   or   (iii)   use   of   means   or   instruments   of
transportation or communication in interstate commerce or of the mails to
offer  to  sell  or  offer  to  buy,  through  the  use  or  medium  of  written
contracts,  offering  documents,  prospectus,  oral  and  written  statements,  or
otherwise, securities as to which no registration statement had been filed.
• in the offer or sale of securities, by use of the means and instrumentalities
of  interstate  commerce  or  by  use  of  the  mails,  the  obtaining  of  money  or
property  by  means  of  untrue  statements  of  a  material  fact  and  omitted  to
state  a  material  fact  necessary  in  order  to  make  the  statements  made,  in
light of the circumstances under which they were made, not misleading;
• in connection with the purchase or sale of securities, by use of the means
and  instrumentalities  of  interstate  commerce  or  by  use  of  the  mails,  the
making  of  untrue  statements  of  a  material  fact  and  omission to  state  a
material  fact  necessary  in  order  to  make  the  statements  made,  in  light  of
the circumstances under which they were made, not misleading
63. For these reasons, Defendants Rice and Ford aided and abetted violations of, and,
unless enjoined, will continue to aid and abet violations of Securities Act Sections 5(a), 5(c) [15
U.S.C.  §  77e(a)  and  (c)]  and  17(a)(2)  [15  U.S.C.  §  77q(a)(2)]  and Exchange  Act  Section  10(b)
[15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)].
V.
RELIEF REQUESTED

 WHEREFORE, the SEC respectfully requests that the Court:

1. Preliminarily  and  permanently  enjoin  Defendants  from  violating  Securities  Act

SEC v. AriseBank, et al.
First Amended Complaint   Page 16
Sections 5(a) and (c) and 17(a)(2) and Exchange Act Section 10(b) and Rule 10b-5(b) thereunder;
2. Preliminarily  and  permanently  enjoin  Defendants  Rice  and  Ford  from  participating
in an offering of digital securities;
3. Prohibits Defendants Rice and Ford, pursuant to Section 21(d)(2) of the Exchange
Act [15 U.S.C. § 78u(d)(2)], from acting as an officer or director of any issuer that has a class of
securities registered under Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to
file reports under Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)];
4. Order Defendants  to each disgorge  ill-gotten  gains  and  benefits  obtained  or  to
which  they  were  not  otherwise  entitled,  as  a  result  of  the  violations  alleged  herein, plus
prejudgment interest on that amount;
5. Order Defendants to each pay a civil money penalty in an amount determined by
the  Court  under  Securities  Act  Section  20(d)  [15  U.S.C.  §  77t(d)]  and  Exchange  Act  Section
21(d) [15 U.S.C. § 78u(d)] for the violations alleged herein; and
6. Retain  jurisdiction  over  this  action  to  implement  and  carry  out  the  terms  of  all
orders and decrees that may be entered; and
7. Order such other relief as this Court may deem just, proper, and equitable.

SEC v. AriseBank, et al.
First Amended Complaint   Page 17
Dated:  February 2, 2018   Respectfully submitted,

   s/ Timothy L. Evans
      CHRIS DAVIS
      Texas Bar No. 24050483
      TIMOTHY L. EVANS
      Texas Bar No. 24065211
      B. DAVID FRASER
      Texas Bar No. 24012654

United States Securities and Exchange Commission
      Fort Worth Regional Office
      Burnett Plaza, Suite 1900
      801 Cherry Street, Unit #18
        Fort Worth, TX 76102-6882
Ph: 817-900-2638 (CD)
Fax: 917-978-4927
[email protected]
[email protected]
[email protected]

      ATTORNEYS FOR PLAINTIFF
      SECURITIES AND EXCHANGE COMMISSION

CERTIFICATE OF SERVICE

I hereby certify that on February 2, 2018, I caused a true and correct copy of the
foregoing First Amended Complaint to be served on all Defendants in and parties to this lawsuit,
in accordance with the Federal Rules of Civil Procedure.

   s/ Timothy L. Evans
      Timothy L. Evans

IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 
________________________________________________ 
SECURITIES AND EXCHANGE COMMISSION, § 
        §    
 Plaintiff,      § 
        § 
vs.        §  
        § 
ARISEBANK,       § Civil Action No.: 3:18-cv-186-M 
JARED RICE SR., and      §  
STANLEY FORD,       §   
        § 

Defendants.      § 
_______________________________________________ § 
 

FIRST AMENDED COMPLAINT 
 
 Plaintiff Securities and Exchange Commission (the "SEC") files this First Amended 

Complaint against Defendants AriseBank, co-founder/CEO Jared Rice Sr., and co-founder/COO 

Stanley Ford (collectively "Defendants") and alleges the following: 

SUMMARY 
 

1. The SEC files this action to halt an ongoing, fraudulent, and unregistered offering 

of securities and to protect investors who are being actively defrauded.  

2. The fraud is being carried out by Defendants Jared Rice Sr. and Stanley Ford 

through Defendant AriseBank.  AriseBank purports to be the world's first "decentralized" bank, 

allegedly offering a variety of consumer-facing banking products and services and supporting 

more than 700 different virtual currencies.  Claiming to be "one of the largest cryptocurrency 

platforms ever built," AriseBank says it is "focused on bringing cryptocurrency to the average 

consumer and using it to revolutionize banking."   

3. AriseBank began raising money at least as early as November 2017, through a 

securities offering of AriseCoin—its own digital currency.  AriseCoin is being offered in an 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 2 

initial coin offering ("ICO") through which AriseBank claims that it has raised more than $600 

million, with a goal of $1 billion.  The ICO is scheduled to conclude on January 27, 2018, with 

AriseCoin to be distributed to investors on February 10, 2018. 

4. The ICO is an illegal offering of securities because there is no registration 

statement filed or in effect with the SEC, nor is there an applicable exemption from registration.  

The AriseCoin ICO is a general solicitation that uses statements posted on the Internet and 

distributed throughout the world—including the United States.  These marketing efforts include 

statements made through websites the Defendants control and through various social media 

accounts, video and radio interviews, and even a celebrity endorsement.   

5. The ICO offering materials use many materially false statements and omissions to 

induce investment in the ICO.  For example, AriseBank announced in a recent press release that 

it has purchased a 100-year-old commercial bank.  The release stated that with the acquisition, 

AriseBank "can now offer its customers FDIC-insured accounts and transactions . . . ."  This 

claim is false.  FDIC records show that neither AriseBank nor the commercial bank it allegedly 

purchased has ever been an insured depository institution under the Federal Deposit Insurance 

Act. 

6. The Defendants also made false statements about AriseBank's association with a 

payments processing platform through which AriseBank claims to offer an AriseBank-branded 

VISA card.  Finally, the Defendants made materially false statements and omissions about the 

backgrounds and qualifications of key executives—most notably by failing to disclose Rice's 

criminal background.  

7. By engaging in the conduct described in this First Amended Complaint, 

Defendants have committed, and unless restrained and enjoined will continue to commit, 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 3 

violations of the registration and antifraud provisions of the federal securities laws.  Because of 

the ongoing nature of the fraudulent offering and risk of asset dissipation, the SEC seeks 

emergency relief—including temporary restraining orders, asset freezes, and the appointment of 

a receiver over AriseBank. 

I.  
DEFENDANTS 

 
8. AriseBank (a/k/a AriseBank Ltd and AriseBank Foundation, LLC) is an 

unincorporated entity with its principal place of business in Dallas, Texas. 

9. Jared Rice Sr., age 29, is believed to be a resident of Dallas, Texas and is the CEO 

and co-founder of AriseBank.  

10. Stanley Ford, age 45, purports to reside in Dubai, U.A.E, but has also resided in 

Dallas, Texas.  He is the co-founder and Chief Operating Officer of AriseBank.    

II.  
JURISDICTION AND VENUE 

 
11. The SEC brings this action under Securities Act Section 20(b) [15 U.S.C. § 

77t(b)] and Exchange Act Section 21(d) [15 U.S.C. § 78u(d)], seeking to restrain and enjoin the 

Defendants temporarily, preliminarily, and permanently from engaging in such acts and practices 

as alleged herein. 

12. This Court has jurisdiction over this action under Securities Act Section 22(a) [15 

U.S.C. § 77v(a)] and Exchange Act Sections 21(e) and 27 [15 U.S.C. §§ 78u(e) and 78aa].  Each 

of the investments offered and sold as described in this First Amended Complaint is an 

investment contract and, therefore, a "security" as that term is defined under Securities Act 

Section 2(a)(1) [15 U.S. C. § 77b(a)(1)] and Exchange Act Section 3(a)(10) [5 U.S. C. § 

78c(a)(10)].   

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 4 

13. AriseBank, Rice, and Ford, directly and indirectly, made use of the mails or of the 

means and instrumentalities of interstate commerce in connection with the transactions, acts, 

practices, and courses of business described in this First Amended Complaint.   

14. Venue is proper because transactions, acts, practices, and courses of business 

described in this First Amended Complaint occurred within this federal district. 

III.  
FACTUAL ALLEGATIONS 

 
A. BACKGROUND ON DIGITAL TOKENS OR COINS 

15. An ICO is a fundraising event in which an entity offers participants a unique 

"coin" or "token" in exchange for consideration (often in the form of crypto or fiat currency).   

16. The tokens are issued on a "blockchain" or cryptographically secured ledger.1     

17. Generally, coins or tokens may entitle holders to certain rights related to a venture 

underlying the ICO, such as rights to profits, shares of assets, rights to use certain services 

provided by the issuer, and/or voting rights.  These coins or tokens may also be listed on online 

platforms, often called virtual currency exchanges, and tradable for crypto or fiat currency.  

Often, the coins or tokens are immediately tradable. 

18. ICOs are typically announced and promoted through public online channels.  
                                                           
1  A blockchain is a type of distributed ledger, or peer-to-peer database spread across a network, 
that records all transactions in the network in theoretically unchangeable, digitally-recorded data packages 
called blocks.  Each block contains a batch of records of transactions, including a timestamp and a 
reference to the previous block, linking the blocks together in a chain.  The system relies on cryptographic 
techniques for secure recording of transactions.  A blockchain can be shared and accessed by anyone with 
appropriate permissions.  The Bitcoin blockchain is an example of a "non-permissioned," or public and 
open access blockchain.  Anyone can download the Bitcoin open-source software and join.  All 
participants share a single view of the Bitcoin blockchain, which is updated when Bitcoin network 
participants reach a consensus on the validity of transactions under review.  "Permissioned" or private 
blockchains are modifications to that model and require permissioned servers to be approved to 
participate on the network or to access particular information on the blockchain.  Blockchains or 
distributed ledgers can also record what are called smart contracts, which essentially are computer 
programs designed to execute the terms of a contract when certain triggering conditions are met. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 5 

Issuers usually release a "whitepaper" describing the project and the terms of the ICO.  To 

participate, investors are generally required to transfer funds to the issuer's address, online 

wallet, payment processor, or other account.  After the completion of the ICO, the issuer will 

distribute its unique coin or token to the participants' unique address on the blockchain.   

19. In some instances, the coins or tokens may continue to be sold by the original 

issuer after the ICO has completed.  In others, they may only be obtained by purchasing them on 

secondary markets. 

B. DEFENDANTS BEGIN MARKETING THE ICO 

20. On its website, www.arisebank.com,2 AriseBank claims that it was founded in 

March 2017 by Rice and Ford.  The company's initial plan was announced, and development 

began, in June 2017.  In October 2017, AriseBank claims to have launched the AriseCoin ICO 

and a beta version of the banking platform.  Although Defendants hold AriseBank out as a 

banking platform, on January 5, 2018, the Texas Department of Banking issued an Order to 

Cease and Desist Activity, prohibiting Defendants and their affiliates from implying that they 

engage in the business of banking in Texas.   

21. In or around October 2017, AriseBank issued an "Elevator Whitepaper," which is 

an abridged offering document authored and signed by Rice.  The Elevator Whitepaper describes 

the AriseBank products in development and AriseBank's leadership team, and discusses a few 

pages about the AriseCoin ICO.  AriseBank also distributed one or more versions of a longer 

Developer Whitepaper, signed by Rice and Ford, in November and December of 2017. 

22. AriseBank touts the AriseCoin ICO as the largest ICO ever launched.  AriseBank 

claims that it completed its initial "Private Sale" of the ICO in two days in November 2017, 
                                                           
2 Defendants also used the website www.arisecoin.com. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 6 

raising $1 million.  After the Private Sale, AriseBank purportedly ran a Presale of the ICO, 

which it says raised $410 million by December 26, 2017.   

23. The ongoing Public Sale began on or around December 26, 2017 and is set to last 

until January 27, 2018.  AriseBank's website indicates that it will seek to raise as much as $500 

million during the public sale.  On January 18, AriseBank claimed in a press release that it had 

raised $600 million. 

24. The arisecoin.com contribution page allows investors to purchase AriseCoin with 

U.S. dollars and a variety of virtual currencies, including Ethereum (ETH), Bitcoin (BTC), 

Litecoin (LTC), Dogecoin (DOGE), and NEM (XEM).  The website does not prohibit 

investments from U.S. citizens or make any assessment of an investor's accreditation. 

25. AriseBank lists the price of its AriseCoin, which it also refers to as ACO, as $1.40 

per AriseCoin with 833,333,333 available to acquire.  The price under the Presale was $1.20, 

with a 75 AriseCoin minimum purchase. 

26. As a key part of its sales pitch, AriseBank claims that it has developed an 

algorithmic trading application, which it calls aIExchanger, that automatically makes trades in 

various cryptocurrencies.  AriseBank alleges that aIExchanger will automatically make trades 

with funds in AriseBank customer accounts, generating daily profits.  A portion of these profits 

will be paid to AriseCoin holders on a daily basis in the form of eACO.  AriseBank describes 

eACO as a separate cryptocurrency from AriseCoin, and AriseBank touts it as the first expiring 

cryptocurrency: after receiving eACO, its holders have a limited period of time to spend it before 

it automatically expires.  AriseBank claims that this forced circulation will increase the value of 

AriseCoin.  AriseBank also takes a portion of the daily aIExchanger profits as a "broker fee."   

27. In discussing how AriseBank will drive the increase of value of AriseCoin, the 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 7 

Developer Whitepaper states: 

Our goal with AriseCoin is to drive overall circulation by incentivizing ACO holders 
to spend their extra rewarded eACO bonus coins before they expire. This causes 
eACO currency to be used rather than just held in static accounts, which in turns [sic] 
drives and grows the market value of AriseCoin economy and thus increase [sic] the 
value of ACO holdings.   
… 
AriseCoin works directly with the AriseBank Platform.  In fact, they both work in 
concert with one another.  AriseCoin is minted daily, based on the total gains from all 
AriseBank bank accounts.  Those minted AriseCoins are then automatically 
distributed to AriseCoin wallet holders around the world, creating truly organic 
circulation, while also creating wealth distribution to everyone who's a part of the 
AriseCoin community. 
 

And elsewhere it states that "eACO are minted on a daily basis, in proportion to the 

collective gains of AriseBank customers and are then algorithmically distributed back to all 

AriseCoin holders." 

 
C. DEFENDANTS FAIL TO REGISTER THE ARISECOIN ICO WITH THE SEC 

28. Federal securities laws require that companies disclose financial information 

through the registration of securities with the SEC.  This information allows investors to make 

informed judgments about whether to purchase a company's securities.   

29. The AriseCoin ICO is an offering of securities, which must be registered with the 

SEC unless an exemption applies.  No such exemption applies here.   

30. Neither AriseBank nor its AriseCoin are registered with the SEC in any way. 

31. For the purpose of applicable exemptions, AriseBank's offering of AriseCoin 

through the AriseCoin ICO was not limited by size, geography, number of investors, or investor 

accreditation status. 

32. Rice has made statements falsely claiming that Defendants and AriseCoin are not 

subject to regulation by the SEC.  In early October 2017, Rice published a statement on 

Facebook and AriseBank.com, described in part as "a statement on our fight with the SEC."  

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 8 

Rice explains in the post that companies sell digital assets such as tokens "to gain investment via 

a self-established network of private investors."  After equating digital asset tokens with stock in 

a company, Rice mistakenly remarks that "a private company can issue private stock to 

ANYONE who wants to invest in their company and/or products without the SEC's involvement 

in any way."3  Rice declared that "[r]ather than close our ICOs and shiver in fear, companies like 

AriseBank have geared up for the coming fight with the SEC."          

D. DEFENDANTS MAKE MATERIALLY FALSE AND MISLEADING STATEMENTS AND 
OMISSIONS  

33. In addition to its failure to register the AriseCoin ICO, Defendants made false and 

misleading statements and omissions in its whitepapers, press releases, and other public 

statements. 

34. These statements and omissions were made in connection with the AriseCoin 

ICO, and Defendants obtained money or property by means of these statements.  And they made 

them knowingly, recklessly, or at a minimum negligently. 

The Defendants Falsely Claim Purchase of an FDIC-Insured Bank 

35. In December 2017, AriseBank announced it was acquiring a 100-year-old FDIC-

insured bank, with "hundreds of banking partnerships across the world and many certifications 

and licenses."  AriseBank continued to issue press releases on this topic through January 18, 

2018, when it announced that it had completed the acquisition "and now holds 100 percent of the 

equity in both KFMC Bank Holding Company, a 100 year-old commercial bank."   

36. AriseBank touted the importance of this purported acquisition: "With the addition 

                                                           
3 In a private Facebook conversation, however, Rice stated: "[ICO] tokens are shares, in reality.  They 
[sic] fall under the Hewy [sic] rules and the Hewy [sic] test.  [T]hey are [']investor contracts [sic][']."  He 
also falsely claimed: "[T]he SEC sat me down last week and pre-audited us and the nerds got on my ass 
and said… [f***] the FBI/ [f***] the SEC[.]"   

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 9 

of the traditional bank[] AriseBank will now have an arm to comply with industry regulation and 

give its customers added confidence that even disruptive banking services offering 

cryptocurrencies will operate with the same assurance and consistency as those of a traditional 

bank.  As part of this acquisition, AriseBank can now offer its customers FDIC-insured accounts 

and transactions." 

37. As each Defendant knew, this statement is false.  The FDIC has no record that 

either AriseBank or KFMC is FDIC-insured.  Thus, neither may offer, or claim to be able to 

offer, FDIC-insured bank accounts.   

38. The FDIC also has no record of any application for the change in ownership of an 

FDIC-insured bank or bank holding company involving AriseBank, KFMC, Rice, or Ford. 

The Defendants Falsely Claim to Offer an AriseBank-branded VISA Card 

39. AriseBank's Developer Whitepaper claims the company offers an AriseBank-

branded VISA card that allows its customers to pay for goods and services using any of 700 

different virtual currencies that they can hold in their AriseBank account.  It also states that 

"Crypto in your Arise account is now instantly available on your AriseCard VISA."  

40. AriseBank makes claims about the specific tools it uses to facilitate these cards.  

In its Developer Whitepaper, AriseBank claims that it provides the VISA card through a service 

named Marqeta, which was listed on its website as a "Partner": "Powered by Marqueta (sic) – 

AriseBank utilizes Marqueta's (sic) world renowned VISA API, allowing us to do things that 

most crypto wallets who have VISA cards are unable to do."   

41. On its Facebook page, AriseBank announced on October 4, 2017, that "[o]ur new 

partnership with VISA and Marqeta has enabled the AriseCard and the entire AriseCard platform 

to change the very foundation of how we spend our money.  From virtual to physical cards, the 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 10 

AriseCard platform is directly compatible with …over 700 cryptocurrencies." 

42. As each Defendant knew, AriseBank has no relationship with Marqeta.  And after 

learning of these claims, Marqeta sent AriseBank a cease-and-desist letter and made public 

statements on Twitter that it did not have any relationship with AriseBank and did not provide 

programs that permit the spending of cryptocurrency. 

The Defendants Misled Investors About the Backgrounds of AriseBank Officers 

43. On its website and Facebook page and in its whitepapers, AriseBank identifies its 

executives and provides brief biographies for them.  These biographies tout the credentials and 

credibility of these executives.  They are misleading—omitting key information, including Rice's 

criminal background.   

44. For instance, the Defendants tout Rice in the Elevator Whitepaper as a "futurist[] 

who envisioned the entire Arise-Bank and AriseCoin idea."  Rice has also supposedly made 

"[y]ears of community contributions [. . .] contributing code under the MIT license."  And he has 

supposedly performed "[y]ears of community work [. . .] working in the communities he made it 

out of and giv[ing] back frequently with projects like Dotemy."4 

45. As the Defendants knew or were reckless in not knowing, Rice's biography was 

materially misleading, since it hid from investors that: 

• Rice is currently on probation as a part of a plea deal stemming from a Collin 
County, Texas felony indictment in November 2015 for theft and tampering with 
government records. 

• He is currently under felony indictment in Dallas County, Texas for assault, after 
which he allegedly destroyed evidence by stealing the victim’s cell phone and 
deleting an audio recording of the incident. 

• He is the subject of one or more unpaid civil judgments dating back to at least 
2015. 
  

                                                           
4 The other documents referenced in the previous paragraph contain similar statements about Rice. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 11 

46. In short, Rice is not the highly-competent professional and community activist 

Defendants held him out to be.  The undisclosed information—which bears directly on his 

honesty, professional competence, and fair dealing as AriseBank's CEO—would have been 

highly material to investors, especially allegations concerning stealing and tampering with 

government documents and destroying evidence.  The convictions and/or guilty pleas also 

impact the Defendants' ability to obtain licenses to own or operate financial institutions under 

restrictions imposed by the FDIC. 

47. Finally, the Defendants lured investors into the scheme by distributing false or 

misleading biographical information about Kelvin Spencer, who they held out as AriseBank's 

President.5 

48. Perhaps most notably, Spencer was never actively involved in AriseBank's 

operations.  Instead, Rice—who Spencer knew and trusted from his days growing up in Dallas—

fraudulently used Spencer's name, likeness, and biography to mislead investors about the 

legitimacy of AriseBank. 

49. For instance, in the Developer Whitepaper, the Defendants falsely stated:  

• Kelvin has "worked closely with the CEO and founders of AriseBank for the past 
decade."  Spencer did not work with Rice for the past decade and was only in 
sporadic contact with him over that period.  And he has never met Stanley Ford, the 
other Co-founder. 

• Kelvin has "sold many lucrative software companies."  While Spencer has sold some 
software programs, he has never sold a software company. 

• Kelvin has "made several million dollars off of Bitcoin and Ethereum assets, by 
creating his own auto-trading algorithm that he utilized on multiple trading exchanges 

                                                           
5 The SEC's original Complaint contained the erroneous allegation that Spencer has a criminal history.  
That is not the case.  Having filed this case on an emergency basis, ex parte and under seal, SEC counsel 
first realized the error by speaking with Spencer after the case was unsealed. Upon speaking with him, 
SEC counsel determined that the prior criminal conduct alleged in the original complaint relates to 
another person with the same name and similar identifying characteristics.  SEC counsel greatly 
appreciates Mr. Spencer's assistance in correcting its mistake and apologizes to him for it. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 12 

like GDax."  While Spencer wrote some programs to trade cryptocurrencies in his 
free time, he has not made significant profits trading—much less millions of dollars. 

• "Kelvin [. . .] works day to day with the CEO and COO to bring new products and 
partnerships."  Spencer did not work day to day with Rice or Ford, nor was he 
involved in new products or partnerships. 

• "Kelvin [. . .] will head the aEX and aiExchanger."  Spencer never did any work 
on aEX or aiExchanger. 

• "Kelvin [. . .] is helping to grow one of the best blockchain developer teams in the 
industry."  Spencer did not have a blockchain developer team. 

 
IV.  

CLAIMS FOR RELIEF 
 

FIRST CLAIM FOR RELIEF 
Unregistered Offers and Sales of Securities 

Violation of Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and (c)] 
(All Defendants) 

 
50. The SEC incorporates the allegations in paragraphs 1 through 46 of this First 

Amended Complaint by reference as if set forth verbatim in this Claim. 

51. By engaging in the conduct described above, Defendants, directly or indirectly, 

singly or in concert with others, (i) made use of means or instruments of transportation or 

communication in interstate commerce or of the mails to sell, through the use or medium of 

written contracts, offering documents, prospectus, oral and written statements, or otherwise, 

securities as to which no registration statement was in effect; (ii) for the purpose of sale or 

delivery after sale, carried or caused to be carried through the mails or in interstate commerce, by 

means or instruments of transportation, securities as to which no registration statement was in 

effect; or (iii) made use of means or instruments of transportation or communication in interstate 

commerce or of the mails to offer to sell or offer to buy, through the use or medium of written 

contracts, offering documents, prospectus, oral and written statements, or otherwise, securities as 

to which no registration statement had been filed. 

52. For these reasons, Defendants have violated, and unless restrained and enjoined, 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 13 

they will continue to violate Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and 

(c)]. 

SECOND CLAIM FOR RELIEF 
Fraud in the Offer or Sale of Securities in 

Violation of Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)] 
(All Defendants) 

 
53. The SEC re-alleges and incorporates paragraphs 1 through 46 of this  

First Amended Complaint by reference as if set forth verbatim in this Claim. 

54. By engaging in the conduct described above, Defendants directly or indirectly, 

singly or in concert with others, in the offer or sale of securities, by use of the means and 

instrumentalities of interstate commerce or by use of the mails, and at least negligently, have 

obtained money or property by means of untrue statements of a material fact and omitted to state 

a material fact necessary in order to make the statements made, in light of the circumstances 

under which they were made, not misleading. 

55. Defendants knew or should have known that they obtained money or property by 

means of untrue statements of a material fact and omitted to state a material fact necessary in 

order to make the statements made, in light of the circumstances under which they were made, 

not misleading. 

56. For these reasons, Defendants have violated and, unless enjoined, will continue to 

violate Securities Act Section 17(a)(2) [15 U.S.C. § 77q(a)(2)]. 

THIRD CLAIM FOR RELIEF 
Fraud in Connection With the Purchase and Sale of Securities 

Violation of Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder 
[15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5(b)] 

(All Defendants) 
 

57. The SEC re-alleges and incorporates paragraphs 1 through 46 of this First 

Amended Complaint by reference as if set forth verbatim in this Claim. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 14 

58. By engaging in the conduct described above, Defendants, directly or indirectly, 

singly or in concert with others, in connection with the purchase or sale of securities, by use of 

the means and instrumentalities of interstate commerce or by use of the mails, have made untrue 

statements of a material fact and omitted to state a material fact necessary in order to make the 

statements made, in light of the circumstances under which they were made, not misleading. 

59. Defendants made the above-referenced untrue and misleading statements 

knowingly or with severe recklessness.   

60. For these reasons, Defendants violated and, unless enjoined, will continue to 

violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 

240.10b-5(b)]. 

FOURTH CLAIM FOR RELIEF 
Aiding and Abetting Violations of Sections 5(a) and (c) and 17(a)(2) of the Securities Act 

and Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder 
(Rice and Ford) 

 
61. The SEC re-alleges and incorporates paragraphs 1 through 46 of this First 

Amended Complaint by reference as if set forth verbatim in this Claim. 

62. By engaging in the conduct described above, Defendants Rice and Ford 

knowingly or recklessly aided and abetted, pursuant to Section 15(b) of the Securities Act and 

Section 20(e) of the Exchange Act: 

• (i) the use of means or instruments of transportation or communication in 

interstate commerce or of the mails to sell, through the use or medium of 

written contracts, offering documents, prospectus, oral and written 

statements, or otherwise, securities as to which no registration statement 

was in effect; (ii) for the purpose of sale or delivery after sale, carried or 

caused to be carried through the mails or in interstate commerce, by means 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 15 

or instruments of transportation, securities as to which no registration 

statement was in effect; or (iii) use of means or instruments of 

transportation or communication in interstate commerce or of the mails to 

offer to sell or offer to buy, through the use or medium of written 

contracts, offering documents, prospectus, oral and written statements, or 

otherwise, securities as to which no registration statement had been filed. 

• in the offer or sale of securities, by use of the means and instrumentalities 

of interstate commerce or by use of the mails, the obtaining of money or 

property by means of untrue statements of a material fact and omitted to 

state a material fact necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading;  

• in connection with the purchase or sale of securities, by use of the means 

and instrumentalities of interstate commerce or by use of the mails, the 

making of untrue statements of a material fact and omission to state a 

material fact necessary in order to make the statements made, in light of 

the circumstances under which they were made, not misleading 

63. For these reasons, Defendants Rice and Ford aided and abetted violations of, and, 

unless enjoined, will continue to aid and abet violations of Securities Act Sections 5(a), 5(c) [15 

U.S.C. § 77e(a) and (c)] and 17(a)(2) [15 U.S.C. § 77q(a)(2)] and Exchange Act Section 10(b) 

[15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)]. 

V. 
RELIEF REQUESTED 

 
 WHEREFORE, the SEC respectfully requests that the Court: 
 

1. Preliminarily and permanently enjoin Defendants from violating Securities Act 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 16 

Sections 5(a) and (c) and 17(a)(2) and Exchange Act Section 10(b) and Rule 10b-5(b) thereunder; 

2. Preliminarily and permanently enjoin Defendants Rice and Ford from participating 

in an offering of digital securities; 

3. Prohibits Defendants Rice and Ford, pursuant to Section 21(d)(2) of the Exchange 

Act [15 U.S.C. § 78u(d)(2)], from acting as an officer or director of any issuer that has a class of 

securities registered under Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to 

file reports under Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)]; 

4. Order Defendants to each disgorge ill-gotten gains and benefits obtained or to 

which they were not otherwise entitled, as a result of the violations alleged herein, plus 

prejudgment interest on that amount; 

5. Order Defendants to each pay a civil money penalty in an amount determined by 

the Court under Securities Act Section 20(d) [15 U.S.C. § 77t(d)] and Exchange Act Section 

21(d) [15 U.S.C. § 78u(d)] for the violations alleged herein; and 

6. Retain jurisdiction over this action to implement and carry out the terms of all 

orders and decrees that may be entered; and  

7. Order such other relief as this Court may deem just, proper, and equitable. 

                                                                                         
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SEC v. AriseBank, et al.  
First Amended Complaint   Page 17 

Dated:  February 2, 2018   Respectfully submitted, 
 
 
         s/ Timothy L. Evans                           
      CHRIS DAVIS 
      Texas Bar No. 24050483 
      TIMOTHY L. EVANS 
      Texas Bar No. 24065211 
      B. DAVID FRASER  
      Texas Bar No. 24012654     
 

United States Securities and Exchange Commission 
      Fort Worth Regional Office 
      Burnett Plaza, Suite 1900 
      801 Cherry Street, Unit #18 

        Fort Worth, TX 76102-6882 
Ph: 817-900-2638 (CD) 
Fax: 917-978-4927 
[email protected] 
[email protected] 
[email protected] 

       
      ATTORNEYS FOR PLAINTIFF 
      SECURITIES AND EXCHANGE COMMISSION 

 

 
CERTIFICATE OF SERVICE 

 
I hereby certify that on February 2, 2018, I caused a true and correct copy of the 

foregoing First Amended Complaint to be served on all Defendants in and parties to this lawsuit, 
in accordance with the Federal Rules of Civil Procedure.  
 

 
         s/ Timothy L. Evans                           
      Timothy L. Evans  
 
 

                                                                                         
 Case 3:18-cv-00186-M   Document 21   Filed 02/02/18    Page 17 of 17   PageID 444


	(All Defendants)
	(All Defendants)
	[15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5(b)]
	(All Defendants)