The U.S. Securities and Exchange Commission (SEC) has accused Dragonchain Inc, Dragonchain Foundation, The Dragon Company, and its creator, John Joseph Roets, with generating $16.5 million via unregistered securities sales.
The defendants allegedly launched an unregistered offering of Dragon tokens (DRGN) in two parts, including a reduced “pre-sale” and an initial coin offering (ICO).
The SEC claims that the defendants raised about $14 million from approximately 5,000 investors worldwide, including the United States, through an ICO in 2017.
Then, from 2019 through 2022, they earned an extra $2.5 million, for a total of $16.5 million, from the sale of DRGN tokens “to fund business expenses to further develop and sell Dragonchain technology.”
The agency said that it intends to pursue “permanent injunctions, disgorgement with prejudgment interest, civil fines, and conduct-based injunctions against each offender.”
The most recent accusations do not come as a surprise to Roets, since he anticipated them. The Commission had told him earlier this year that he and his firms will be charged for selling unregistered securities.
In a May statement to the SEC, Roets said that the agency was “picking and selecting projects to pursue, often singling out those with the most potential to upset entrenched interests while allowing others a clean pass.”
The announcement on the charges had a detrimental effect on the value of the DRGN. At the time of writing, the token was trading for $0.022, a decrease of more than 13% on the day.
In the meanwhile, the SEC has continued to pursue enforcement action against crypto businesses, particularly those who obtained cash via ICOs, in recent times.
In June, the regulator initiated an investigation into the major cryptocurrency exchange, Binance, to examine whether the exchange violated any regulations involving the sale of securities when its native token, BNB, was issued through an initial coin offering (ICO) in 2017.
Coinbase, an American cryptocurrency exchange, was recently probed by the SEC for potential securities listings.