SEC Files Charges Against Dragonchain Over $16.5 Million DRGN ICO
- John Joseph Roets and his firms-Dragonchain, the Dragonchain Foundation, and the Dragon Company are accused of raising $16.5 million in unregistered crypto asset securities offerings.
- SEC alleges between 2019 and 2022, Roets and the entities allegedly sold approximately $2.5 million worth of DRGNs to develop and market Dragonchain technology
- SEC states that the 2017 presale and the ICO of DRGN were unregistered crypto asset securities offerings that allegedly raised $14 million from more than 5,000 investors.
The U.S. Securities and Exchange Commission(SEC) has recently increased its scrutinization and watch over cryptocurrency projects. On August 16, SEC announced filing charges against John Joseph Roets and his firms — Dragonchain, the Dragonchain Foundation, and The Dragon Company — for allegedly raising $16.5 million in unregistered “crypto asset” securities offerings.
According to SEC, in 2017, John Roets and his 3 entities conducted an unregistered offering of Dragon tokens through a discounted “presale” in August 2017 to members of a crypto investment club and through an initial coin offering (“ICO”) in October and November 2017 marketed predominately to crypto investors.
SEC further alleges that Dragonchain violated the Securities Act and raised approximately $14 million from about 5,000 investors worldwide. The regulator further adds that the DRGN token was marketed to crypto investors, touting the token’s investment value, pricing, and “listing” on trading platforms.
Following this SEC states that between 2019 and 2022, Roets and the entities allegedly offered and sold approximately $2.5 million worth of DRGNs to develop and market Dragonchain technology; SEC now demands disgorgement of the proceeds with prejudgment interest and a civil monetary penalty.
The formal charge by SEC comes after years of the agency subpoenaing Dragonchain executives and employees. Dragonchain has been under investigation by the SEC since 2018, and the company in May published a letter in response to the SEC’s recommendation to charge Dragonchain on April 27, 2022.
In his open letter, Roets stated he was confident he had a “very strong case” against the charges. He alleged that the SEC tried to shoehorn software technology into incompatible securities law from the 1930s. “We’ve never had an opportunity to present the case that the DRGN is a software license and utility token versus a financial security,” his letter reads.
This is not the first time Dragonchain has come under regulatory scrutiny. A 2021 court filing by the State of Washington called the DRGN token’s security. The filing stated that Dragonchain “is not currently registered to sell its securities in the state of Washington”. According to the filing, the company was fined $50,000 and issued a cease and desist order.
SEC has ramped up its enforcement actions against fraudulent crypto projects. The latest SEC move on Dragonchain SEC follows the commission claiming in a court filing that nine digital assets listed on the leading cryptocurrency exchange Coinbase are unregistered securities.