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U.S. Securities and Exchange Commission

Before the

Securities Exchange Act of 1934
Release No. 51142 / February 7, 2005

Admin. Proc. File No. 3-11776

In the Matter of




The Securities and Exchange Commission (Commission) initiated this proceeding on December 17, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act). Respondent Lonnie Dragon (Dragon) was served with the Order Instituting Proceedings (OIP) on December 28, 2004. To date, Dragon has failed to file an Answer to the OIP.

During the January 24, 2005, prehearing conference, Dragon indicated that he would not defend the proceeding. At that time, the Division of Enforcement (Division) moved for the entry of a default order against Dragon for failing to file an Answer or otherwise defend the proceeding. The Division memorialized this request in a letter dated January 24, 2005.

Dragon is in default for failing to file an Answer within the time provided or otherwise defend the proceeding. See 17 C.F.R. 201.155(a), .220(f). Pursuant to Rule 155(a) of the Commission's Rules of Practice, 17 C.F.R. 201.155(a), I find the following allegations in the OIP to be true.

Dragon is a resident of the San Diego, California area. From approximately June 2000 through September 2000, Dragon publicly offered and sold securities in LevelRed Investments, Inc., while not associated with a registered broker-dealer.

On November 18, 2004, the United States District Court for the Southern District of California entered an order permanently enjoining and restraining Dragon from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933; and Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. SEC v. Brian Lee, 03-CV-1957-JH (JFS). The court entered the order by default. The Commission's complaint alleged, inter alia, that between approximately June 2000 and September 2000, Dragon and others raised approximately $887,503 in an unregistered, non-exempt offering of stock for LevelRed Investments, Inc., and that the offering was fraudulent because the offering materials failed to disclose, among other things, the true control persons of the company and the amount of the offering proceeds that were paid as sales commissions.

In view of the foregoing, I find that it is appropriate in the public interest to bar Dragon from association with any broker or dealer.


IT IS ORDERED THAT, pursuant to Section 15(b) of the Securities Exchange Act of 1934, Respondent Lonnie Dragon is hereby BARRED from association with any broker or dealer.

Robert G. Mahony
Administrative Law Judge


Modified: 01/07/2005