DragonChain (DRGN) Foundation Sued by SEC for Unregistered Securities Violations
DragonChain and Regulatory Risk
The SEC has filed litigation against the creator of DragonChain (DRGN) and three entities that he controls (DragonChain Inc, DragonChain Foundation, and The Dragon Company (TDC)) for conducting an unregistered securities offering of DragonChain starting in 2017. The SEC complaint charges the defendant with violating section 5(a) and (c) of the Securities Act of 1933. Given that the violation occurred in 2017 and is now being pursued by the SEC in 2022, our inclination is to believe that we will likely see many more of these complaints filed against other cryptocurrency ICOs of that era over the coming months.
Full Link to PDF complaint
The SEC alleges that in 2017, Roets, Dragonchain, and the Foundation conducted an unregistered offering of Dragon tokens ("DRGN") in two phases: (1) a discounted "presale" in August 2017 to members of a crypto investment club, and (2) an initial coin offering ("ICO") in October and November 2017 marketed predominately to crypto investors. Through this offering, the defendants allegedly raised approximately $14 million from approximately 5,000 investors around the world, including the United States. According to the SEC's complaint, the defendants marketed the offering to crypto investors, and their personnel and agents publicly discussed DRGN's investment value, pricing, and "listing" on trading platforms, among other things. Then, 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.
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