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The Securities and Exchange Commission (SEC) upheld its plan to increase enforcement on the sale of crypto assets by filing a complaint against Dragonchain for engaging in an illegal offer and sale of securities in violation of the Securities Act of 1933. Dragonchain advertises itself as ”
The SEC alleges that in 2017, various Dragonchain-related entities and individuals conducted an unregistered offering of “Dragon tokens” (or DRGN) where they raised approximately $14 million from thousands of investors worldwide, including investors in the United States. The SEC further contends that Dragonchain marketed these tokens as securities because, among other things, they promoted that the investment value of Dragon tokens would “increase as the Dragonchain ‘ecosystem’ matured” and that Dragon tokens would be traded on trading platforms. The SEC further alleges that Dragonchain and other entities offered and sold approximately $2.5 million worth of Dragon tokens to cover business expenses to further develop and commercialize its Dragonchain technology. The SEC lawsuit concludes that Dragonchain distributed its sale of Dragon tokens without registering them with the SEC as required by federal securities laws. Given the increased staffing of the SEC to enforce these types of token issuances, we can expect to see more enforcement on the horizon, even for tokens that have been trading for years, such as the Dragon token.
The SEC’s statement on the action can be found here.
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