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FBI arrests man accused of scamming $4.2 million in fake digital cash fraud scheme

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While regulators debate the pros and cons of bitcoins, the rising real-world value of this digital currency inspires the question: What makes money, money?

A man who claimed to own the world’s first decentralized bank platform was arrested by FBI agents Wednesday, accused of cheating investors out of more than $4.2 million in a cryptocurrency scheme, according to the U.S. attorney’s office.

Jared Rice Sr., 30, was indicted on three counts of securities fraud and three counts of wire fraud, stemming from an investigation and civil action filed this year by the Fort Worth regional office of the Securities and Exchange Commission.

Rice is accused of lying to investors about AriseBank, which was built on a currency he called AriseCoin. Rice told investors he could offer government insured accounts and banking services, which included Visa-brand credit and debit cards, and cryptocurrency services.

The truth was that AriseBank could not by law conduct banking business in Texas, was not FDIC insured and did not have any sort of partnership with Visa, a news release from the U.S attorney’s office said.

Rice is also accused of lying about an initial coin offering he said raised $600 million in a few weeks. Rice failed to tell investors that he had pleaded guilty to state felony charges in a prior internet-related business scheme. Meanwhile, Rice enticed holders of other digital currencies such as Bitcoin, Ethereum, Litecoin and Fiat currency to trade those for AriseCoins, the release said.

Rice began promoting AriseBank perhaps as early as June 2017 through press releases, video interviews, on Facebook and Twitter and his own websites, according to a recently unsealed federal grand jury indictment.

The government also alleges that Rice designated the names of several products as trademarked intellectual property when in fact none of those names were trademarked in the United States, the indictment states.

Despite what Rice said, AriseBank was not a bank, the indictment said.

Rice also lied about having acquired two traditional banks, the indictment said. According to a complaint filed in January by the Securities and Exchange Commission, Rice claimed that neither he nor AriseCoin was subject to SEC regulation.

The Fort Worth SEC branch disagreed and filed a civil action against Rice, ArsieBank and another defendant.

Rice is currently on probation for forging a Texas Secretary of State incorporation document and for a theft conviction for stealing funds provided by an investor, court documents show.

Rice spent the money he obtained from investors on his girlfriend, on a family law attorney, on hotels, food, clothing and Uber rides, the indictment said.

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