WASHINGTON—The latest caper in the fast-moving world of initial coin offerings comes from a company that aimed to raise $1 billion and claimed to raise $600 million.

In reality, it may not have raised much more than $1 million.

Federal regulators moved to halt the coin offering of Dallas-based AriseBank, in one of the biggest U.S. interventions yet into the world of raising money by issuing digital tokens.

Initial coin offerings have been an investing fad over the past year, attracting cash from technology investors and speculators drawn to the idea that the tokens will give them a profitable piece of the open-ledger “blockchain” technology that backs bitcoin and other virtual currencies.

Regulators though have warned of increasingly blatant fraud in the coin offerings, and Facebook Inc. Tuesday said it would ban ads on its site for products including coin offerings and cryptocurrencies because they are “frequently associated with misleading or deceptive” practices.


On Tuesday, the Securities and Exchange Commission separately said it obtained a court order, unsealed late Monday, that permits a receiver to seize cryptocurrencies held by AriseBank, which allegedly marketed and received the proceeds from the coin offering. The SEC called the deal a “scam” and alleges the company and its executives misled investors about buying a federally insured bank and its ability to offer a VISA card backed by “any of 700-plus cryptocurrencies.”

AriseBank’s ICO featured some of the hallmarks of suspicious deals that the SEC has repeatedly warned about. The company signed up a celebrity endorser—retired boxer Evander Holyfield—and made heady claims about the scope of its business, claiming to be “one of the largest cryptocurrency platforms ever built” and the world’s first “decentralized bank,” according to an SEC complaint filed in federal court in Dallas.

AriseBank apparently ran its offering on a network called BitShares, a popular cryptocurrency platform. A check of public records there shows that the bank’s initial coin “wallet” collected about $1.1 million, according to Galen Moore, publisher of a research firm called Token Report.

Lawyers secured a “couple million” dollars worth of cryptocurrencies from the company, according to two people familiar with the matter. On Jan. 18, the company issued a press release saying it had raised $600 million and expected to raise more than $1 billion when it was finished.


The SEC says the people behind AriseBank, including Jared Rice Sr. and Stanley Ford, committed fraud. The hagiography on Mr. Rice’s personal website portrayed him as somebody who fought against extreme odds, with a “sad but inspiring” personal story. He lists himself as chief executive of a firm called Dotoji, and explains his purported work as an entrepreneur and activist.

The virtual currency bitcoin continues surging to new highs as a frenzy of investors get in on the action. WSJ's Paul Vigna explains what you need to know, and how to invest should you want to join the mania. Photo: Alexander Hotz/The Wall Street Journal.

Mr. Rice, 29, told a radio interviewer last week that FBI agents on Friday raided a location where he had been sleeping. “I got woken up that morning with guns pointed at me,” he said on Coast to Coast AM, a late-night radio talk show that says it delivers “the latest paranormal news.” A recording of the interview was posted on YouTube.

The FBI executed a search warrant at the location, according to people familiar with the matter. Neither Mr. Rice nor Mr. Ford were available for comment.

In its complaint, the SEC faulted AriseBank for failing to tell investors that Mr. Rice is on probation for felony theft and tampering with government records. Texas state records show Mr. Rice was arrested in July 2015 on those charges, pleaded guilty and received a four-year probationary sentence.


The company’s coin offering lasted from November until January, when Texas state regulators ordered the company to stop calling itself a bank. The company didn’t comply with the order and issued a press release on Jan. 18 that it had acquired a federally insured bank, KFMC Bank Holding Company, which would enable it to offer clients easier access to cryptocurrencies. The SEC’s complaint says the bank was never federally insured, nor does any business operating under that name appear to be registered in the U.S.

Mark Rasmussen, an attorney at law firm Jones Day, was appointed as receiver in the case, which allows him to take control of the business and identify sources of funds that could be returned to investors.

Many coin-offering sponsors claim they are a regulatory gray area and exempt from federal oversight. The SEC says they are often equivalent to regulated sales of debt or equity.

The SEC said AriseBank violated securities laws by not registering its coin offering with the regulator. AriseBank also didn’t provide investors with required disclosures about its business and financial history.


AriseBank stoked controversy in December when it claimed a partnership with BitShares and Mr. Holyfield to raise $1 billion for charities and disaster relief. Mr. Holyfield wasn’t immediately available for comment.

Stan Larimer, who oversees the BitShares platform as chief executive of a private company, Cryptonomex, said the relationship was merely one of cross promotion. There were no signed agreements or money changing hands. But he strongly supported Mr. Ford and Mr. Rice. “Far as I can tell,” he said in an interview, “all we have is a collection of false statements made about them.”

Mr. Larimer said the promotion now would be scrapped. “There’s nothing left to do,” he said.

—Aaron Lucchetti contributed to this article.

Write to Dave Michaels at dave.michaels@wsj.com and Paul Vigna at paul.vigna@wsj.com