SEC Sues Dragonchain Over $16.5M ICO

Dragonchain is charged with violating the Securities Act of 1933

article-image

Gary Gensler, Chair, US Securities and Exchange Commission | Blockworks exclusive art by Axel Rangel

share
  • DRGN token dropped over 15% since the announcement
  • SEC is requesting Dragonchain return the $16.5 million with interest

The SEC is suing startup founder John Joseph Roets and three entities he controls — Dragonchain, the Dragonchain Foundation and The Dragon Company — for raising $16.5 million in unregistered cryptoasset securities offerings.

Open source blockchain Dragonchain was originally developed as Disney’s private blockchain platform in Seattle in 2016. The court filing, in the US District Court for the Western District of Washington, charges the defendants with violating the Securities Act of 1933.

The SEC claimed both the 2017 presale and the Initial Coin Offering (ICO) of Dragon tokens (DRGN) were unregistered crypto asset securities offerings that allegedly raised approximately $14 million from over 5,000 investors.

Another $2.5 million worth of DRGN was allegedly offered and sold between 2019 and 2022 “to cover business expenditures and market Dragonchain technology.”

The agency now demands disgorgement of the proceeds with prejudgment interest and a civil monetary penalty.

The altcoin has fallen sharply — roughly 15% after the announcement — $0.02 at the time of publication.

Loading Tweet..

DRGN has been under investigation by the SEC since 2018, and the company recently published a letter in response to the SEC’s recommendation to charge the aforementioned parties on April 27, 2022. 

Over the four-year-long dealings with the SEC, Roets’ argument wasn’t taken seriously, he wrote in the letter.

“We’ve never had an opportunity to present the case that the DRGN is a software license and utility token versus a financial security,” Roets said.

He added that the SEC is “picking and choosing projects to target…while giving a free pass to others.”

The company maintains that a DRGN is not a financial security and that during the sale of the DRGN software micro-license, purchasers who paid with bitcoin (BTC) or ether (ETH) directly acquired the utility token as opposed to making an investment.

The SEC has been ramping up its enforcement actions against purveyors of cryptoassets, a trend anticipated to continue.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (1).png

Research

Aave’s revenues have doubled from April lows and are fast approaching all-time highs. With 35% of borrow interest coming from ETH and 55% from stablecoins, Aave is emerging as a powerful proxy as an ETH and stablecoin beta. As looping strategies accelerate growth and Horizon positions the protocol to ride the RWA wave, Aave is shaping up as one of DeFi’s most compelling multi-narrative plays.

article-image

The crypto infrastructure firm expands into payments with a stablecoin network connecting fintechs, banks, and issuers

by Blockworks /
article-image

Private testnet aims to deliver low-cost settlement with partners including Visa, Deutsche Bank, and OpenAI

by Blockworks /
article-image

Solana saw $78 million in REV for August

article-image

Lit Protocol’s Vincent is shifting agentic finance from toy demos to production rails

article-image

The new system aims to unify Europe’s fragmented tokenized asset settlement and cut cross-border costs

by Blockworks /
article-image

Tron slashed fees by 60% as Plasma looms, threatening its USDT moat