SEC Sues Three Entities and Their Founder for Unregistered Crypto Asset Securities Offerings
Litigation Release No. 25468 / August 16, 2022
Securities and Exchange Commission v. Dragonchain, Inc., Dragonchain Foundation, The Dragon Company, John Joseph Roets, No. 2:22-cv-01145 (W.D. Wa. filed August 16, 2022)
The Securities and Exchange Commission charged John Joseph Roets and three entities he controls, Dragonchain Inc. ("Dragonchain"), Dragonchain Foundation (the "Foundation"), and The Dragon Company ("TDC"), for their roles in raising $16.5 million in unregistered crypto asset securities offerings.
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.
The SEC's complaint, filed in the U.S. District Court for the Western District of Washington, charges the defendants with violating Sections 5(a) and (c) of the Securities Act of 1933 ("Securities Act"). The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties against and conduct-based injunctions against each defendant.
The SEC's investigation was conducted by Arsen R. Ablaev of the Crypto Assets and Cyber Unit in the Chicago Regional Office and supervised by Amy Flaherty Hartman and Carolyn Welshhans. The litigation will be handled by Eric M. Phillips and supervised by Daniel J. Hayes.