SEC Sues Dragonchain Over Unregistered Crypto Asset Securities

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The founder of Dragonchain and related entities are facing the U.S. Securities and Exchange Commission allegations that they violated federal anti-fraud provisions for their roles in raising $16.5 million in unregistered crypto asset securities offerings, the regulator has announced.

In a complaint filed in the Western District of Washington, SEC charges the defendants with violating Sections 5(a) and (c) of the Securities Act of 1933. The SEC claims that Dragonchain, and its founder John Joseph Roets, illegally raised over $16million in ‘proceeds through unregistered offers and sales of the securities to approximately 5,000 investors in the United States and abroad,’ and are variously liable for aspects of the alleged scheme, which occurred in 2017.

“Dragonchain used these proceeds to try to develop a type of blockchain technology” the complaint stated.

Dragonchain marketed illegal content to solicit funds

SEC also claims Dragonchain marketing services generated illegal content and claimed its token would increase adoption as the technology grew and their personnel and agents publicly discussed DRGN’s investment value, pricing, and “listing” on trading platforms, among other things. 

“Between 2019 and 2022, Roets, Dragonchain, the Foundation, and TDC allegedly offered and sold approximately $2.5 million worth of DRGNs to cover business expenditures to further develop and market Dragonchain technology, some of which occurred after a state regulator found DRGNs to be securities” SEC said in a statement.

SEC wants Dragochain blocked from trading

The SEC is also seeking a permanent injunction and disgorgement of the ill-gotten gains resulting from the alleged scheme conducted by Dragonchain Inc., Dragonchain Foundation, and the Dragon Company.

“SEC is seeking permanent injunctions, disgorgement with prejudgment interest, civil penalties against and conduct-based injunctions against each defendant.” The complaint stated.  

SEC has sued other companies over unregistered securities

SEC has been cracking down on crypto companies between 2011 and 2015, more companies were netted for filing incomplete suspicious activity reports that prevented authorities from investigating potential misconduct.

In the past, SEC has banged companies with suits in various US Courts and recently launched an investigation on cryptocurrency exchange giant Coinbase.

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Remmy Bahati, is a Crypto and Technology Reporter at BeInCrypto based in New York, USA. She holds a Master of Science degree in Journalism from Columbia University in the City of New York. She also works for Law360 as a Legal News Assistant monitoring the US Congress, the federal and state courts. Not only that, but she worked for the United Nations in the global communications department. A television producer, video editor and writer, she has contributed to CNN, Columbia News Service, New York Times digital, NBS TV, TRT World, BBC, Huffington Post and Citizen TV.

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