Dragonchain is an online cryptocurrency business based located in Bellevue, Wash., was sued on Tuesday by the Securities and Exchange Commission on allegations that it participated in the illegal selling of securities that were not registered by way of its 2017 initial coin offering, and later sale of DRGN tokens that totaled $16.5 million.
The company, which was founded in 2017 by an ex- Walt Disney Co. blockchain architect The company has denied the claims in its previous statements that anticipated an SEC lawsuit.
It’s the latest company in cryptocurrency to come under scrutiny by the SEC The SEC claims that certain crypto assets meet the definition of securities in law that require higher levels of federal oversight and regulation than commodities .
Dragonchain’s founder and CEO John Joseph “Joe” Roets is named as an accused in the suit as are three of his affiliated organisations and companies: Dragonchain Inc., Dragonchain Foundation, and The Dragon Company.
“Because Dragonchain never filed a registration statement for its offering as well as sale of the DRGNs it has not provided investors with the details that other issuers offer in their registration statements when they solicit public investments,” the SEC alleges in its 17-page complaint that was filed on today at U.S. District Court in Seattle.
This allowed the company to operate within “an information vacuum” trading the tokens “into an unregulated market that had only the data Dragonchain would have chosen to share about DRGNs” the suit states.
The suit didn’t take Dragonchain off guard. After four years of correspondence with the SEC provided Dragonchain in April that its investigators will recommend that they pursue Dragonchain for the suspected sale of securities not registered, according to a May 24 blog post by Roetsthat included an extensive defence that was preemptively prepared.
This defense stated it was, in part, “Purchasers of the DRGN micro-license knew and legally accepting that DRGN was an application-specific software utility license that could be used only on the Dragonchain platform, and that it was not intended to be a representation of ownership or shared equity in Dragonchain or the Dragonchain platform or any other associated IP.”
The majority of the complaints seem to be based on misinterpretations of the technology and actual facts. We don’t blame them because they aren’t developers or software engineers. We are still analyzing the allegations.
The trend to treat certain cryptocurrency products as securities has also prompted the SEC to bring a lawsuit in July , against an ex- Coinbase employee from Seattle who was also charged with insider trading on cryptocurrency. A lot of people involved in the cryptocurrency industry argue that the assets they trade ought to be treated as commodities rather than securities.