Three Firms And Their Founder Sued By SEC Over Sale Of Unregistered Securities
- The SEC filed a complaint against three entities and their founder in the U.S. District Court for the Western District of Washington.
- Dragonchain Inc. (Dragonchain), The Dragon Company (TDC), and Dragonchain Foundation (the Foundation) and founder John Joseph Roets allegedly raised $14.2 million via unregistered crypto asset securities offerings.
The United States Securities and Exchange Commission (SEC) is constantly tightening its fist to attack notorious elements in the crypto industry. It has recently filed a complaint against three entities and their founder in the U.S. District Court for the Western District of Washington for unregistered crypto asset securities offerings.
According to the official press release, the SEC has charged John Joseph Roets and three entities controlled by him: Dragonchain Inc. (Dragonchain), The Dragon Company (TDC), and Dragonchain Foundation (the Foundation), for allegedly raising around $16.5 million via unregistered crypto asset securities offerings.
According to the regulatory agency, Roets, Dragonchain, and the Foundation started offering an unregistered token called Dragon Token (DRGN) in 2017. They allegedly conducted DRGN sales in two phases: a discounted presale in August 2017 to members of a crypto investment club and an initial coin offering (ICO) in October and November of the same year, with the predominant marketing to crypto investors. The complaint reads:
“Through this offering, the defendants allegedly raised approximately $14 million from approximately 5,000 investors around the world, including the United States.”
A flood of allegations
The SEC’s lawsuit claims that the defendants publicly discussed DRGN’s investment potential, pricing, and “listing” on trading platforms, among other things, while also marketing the offering to crypto investors. After that, between 2019 and 2022, Roets, Dragonchain, the Foundation, and TDC allegedly offered and sold about $2.5 million worth of DRGN tokens to manage business expenses with the aim to further develop and market Dragonchain technology. Moreover, the complaint outlines that some of these transactions took place after a state regulator recognized DRGNs to be securities.
Notably, the investigation regarding the alleged illicit activities was conducted by the Crypto Assets and Cyber Unit in the Chicago Regional Office’s Arsen R. Ablaev. Amy Flaherty Hartman and Carolyn Welshhans supervised the case.
The SEC charges the defendants with violations of Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”). Moreover, the regulatory body is seeking civil penalties, conduct-based injunctions, disgorgement with prejudgment interest, and permanent injunctions against each defendant.
Coinbase facing SEC probe
Last month, the SEC filed a separate complaint of securities fraud charges against the former product manager of Coinbase, Ishan Wahi, following the Department of Justice (DOJ) investigation into insider trading.
According to the SEC, the insider trading scheme involved nine digital asset securities. Paul Grewal, chief legal officer at Coinbase, responded by denying these allegations. It’s interesting to note that Caroline Pham, commissioner of the CFTC, called the SEC’s actions “a striking example of ‘regulation by enforcement.'”
Since then, the SEC has conducted investigations into Coinbase by identifying a number of assets that it considered being securities listed on the exchange. Additionally, it is looking into whether the crypto exchange giant flouted regulations by allowing trading in certain tokens.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
