SEC Charges Dragonchain for Selling Unregistered Securities

The SEC has charged Dragonchain with selling $16.5 million in unregistered securities; Dragonchain founder and CEO Joe Roets says he has a “very strong case” against the charges.

SEC Charges Dragonchain

U.S. regulators are coming after Dragonchain.

The Securities and Exchange Commission (SEC) announced today that it was charging Dragonchain founder and CEO Joe Roets for allegedly raising $16.5 million by selling unregistered crypto securities. The agency is also charging three entities associated with Roets: Dragonchain Inc., Dragonchain Foundation and The Dragon Company.

According to the SEC, the defendants made $14 million from approximately 5,000 investors around the world through Dragonchain’s initial coin offering in 2017. They then made an additional $2.5 million in the period between 2019 and 2022 through the steady selling of the DRGN token.

The SEC is seeking permanent injunctions, disgorgement with prejudgement interest, civil penalties, and conduct-based injunctions against Roets and his affiliated entities.

Roets, who had previously been notified by the SEC of the investigation, preemptively addressed the charges in an open letter dated May 25. He stated he was confident he had a “very strong case” and that the SEC was “picking and choosing projects to target, often singling out the ones with the biggest opportunity to disrupt incumbent interests, while giving a free pass to others.” 

The SEC has ramped up its enforcement efforts recently. Last month it declared nine crypto tokens listed on Coinbase were, in fact, unregistered securities; it is also reportedly investigating the exchange for allowing its customers trade such tokens. The agency’s regulatory approach, which has been described as “regulation by enforcement” by crypto industry leaders, lawmakers, and regulators alike, has however been met with fierce criticism.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.