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AriseBank's CEO and a co-conspirator have been ordered to pay $2.7 million to the US Securities and Exchange Commission (SEC) to settle charges relating to a cryptocurrency banking scam and ICO.

On Wednesday, the US regulator announced the ruling in the case, which revolved around AriseBank, a now-defunct blockchain startup.

The organization claimed to be "the first decentralized bank to offer the first and largest cryptocurrency banking platform in the world," and said that users could "serve as their own bank."

A service which integrated both traditional fiat currencies and over 700 modern cryptocurrencies appeared as a tempting investment to many, bolstered by AriseBank's claims of partnerships with reputable financial companies such as Visa and the intended acquisition of KFMC Bank Holding Company and TPMG -- both of which were described as traditional banks, but neither appear to exist.

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To generate further excitement, celebrities also endorsed the company, a common tactic used by both legitimate and fraudulent blockchain companies to promote their projects.

However, not all was as it seemed. No partnerships with financial services companies were established, and no acquisitions were on the table.

In addition, AriseBank falsely claimed to be insured under the US Federal Deposit Insurance Act (FDIC), a regulatory element which would quiet even the most skeptical of would-be investors.

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Indeed, the reality was that investors had been duped by the service, which if legitimate, could have been proven to be a radical force in future banking.

Instead, millions of dollars in investor funds, raised by issuing the AriseCoin cryptocurrency, were allegedly being spent to fund luxury lifestyles.

AriseBank CEO Jared Rice Sr. and COO Stanley Ford, were accused by SEC of operating a fraudulent Initial Coin Offering (ICO) scheme earlier this year. ICOs, when legitimate, can prove the financial boost necessary to lift blockchain-related projects off the ground -- but lackadaisical regulation has led to a Wild West scenario teeming with scams and fake companies.

While neither admitted nor denied the charges, Rice and Ford will be forced to jointly pay $2,259,543 in disgorgement -- a legal demand which forces individuals or companies to give up cash or assets gained illegally -- as well as $68,423 in prejudgment interest and $184,767 in penalties.

In addition, both individuals have agreed not to serve as officers or directors of public companies, and are no longer permitted to be involved in digital securities offerings.

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"Rice and Ford lied to AriseBank's investors by pitching the company as a first-of-its-kind decentralized bank offering its own cryptocurrency for customer products and services," said Shamoil Shipchandler, Director of the SEC's Fort Worth Regional Office. "The officer-and-director bar and digital securities offering bar will prevent Rice and Ford from engaging in another cryptoasset-based fraud."

Criminal charges are still outstanding in Rice's case. Announced last month by the US Department of Justice (DoJ), the former executive is facing allegations of both securities fraud and wire fraud. If found guilty, Rice may face up to 120 years in jail.

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