The U.S. Securities and Exchange Commission (SEC) has recently taken decisive action against its first case of insider trading in the cryptocurrency market, demonstrating its commitment to protecting investors from any form of wrongdoing. This noteworthy event should serve as a warning to all cryptocurrency and non-fungible token issuers within the United States that their offerings must be registered with the SEC in accordance with federal securities laws. Specifically, Dragonchain Foundation and related entities raised $16.5 million from about 5,000 investors without adhering to the required regulations. It is therefore essential for companies engaging in activities involving cryptocurrencies or NFTs in the US to take into account their obligations under federal securities law.
Investing In DRGN Tokens: SEC Rules Apply
Dragonchain recently conducted a presale campaign and an Initial Coin Offering (“ICO”) that afforded individuals the opportunity to invest in the project by purchasing DRGN tokens. However, U.S. Securities and Exchange Commission (SEC) rules require that such securities offerings must be registered with the commission. Using the Howey Test for examining investments, the SEC determined that Dragonchain’s token offering constituted a security offering since it entailed the raising of money from investors with the expectation of profits. It is essential to evaluate potential investments like digital coins or tokens under applicable securities regulations to ensure compliance.
SEC Takes Action Against Illegal ICO: $14M Raised from 5K Investors Worldwide
The United States Securities and Exchange Commission (SEC) has recently initiated legal action against the defendants for executing an unregistered Initial Coin Offering (ICO) in 2017, which raised around $14 million from over 5,000 investors across the world, including those residing in the U.S. The ICO provided participants with digital coins known as “Dragon tokens” or DRGN during two phases: a discounted “presale” in August 2017 and a public offering in October and November 2017. As this cryptocurrency token sale was not registered with the SEC, it transgresses the registration regulations of American security laws and faces potential penalties. In addition, the SEC is making efforts to furnish compensation for the affected investors.
Take Caution: Investigate Before Investing
The U.S. Securities and Exchange Commission (SEC) filed a complaint alleging the unregistered sale of securities via a cryptocurrency offering. This was marketed to investors, promising significant value and listing of DRGN tokens on trading platforms. According to the complaint, the defendants sold over $2.5 million worth of these tokens between 2019 and 2022. Furthermore, this activity occurred after a state regulator found that these securities were, in fact, securities.
It is highly advisable for investors to take caution when considering investing in cryptocurrency or other digital asset offerings due to the potential risks involved. Therefore, it is essential for investors to do their due diligence thoroughly before making any investments and seek advice from qualified professionals.
Securing Businesses With Blockchain: Dragonchain Use DRGNs and Fiat to Innovate Quickly
Dragonchain, founded and developed through Walt Disney’s open-source blockchain technology, offers businesses a cost-effective and secure way to innovate quickly, remain agile in competitive markets, and ensure secure transactions. Utilizing the Ethereum blockchain to generate capital, DRGNs (Dragonchain’s native tokens) were initially defined as “utility” tokens that can be used to purchase features on the platform; however, they are not the only accepted forms of currency as purchases can also be made with fiat money. Blockchain technology and open source software are two key components that make Dragonchain an efficient solution to companies looking to excel in the market.
Dragonchain Invested $2M+ to Expand Services and Improve User Experience
Dragonchain leveraged its capital by investing in a variety of projects in the pursuit of broadening and improving their offerings. Through token-based payments, this totaled to over $2 million. A significant investment of $500,000 was made in another blockchain company, Coinme Inc., in order to enhance the scope of operations of the decentralized autonomous organization. Consequently, Dragonchain has witnessed an increase in its user base, improved customer service, amplified product development, and extended service range, resulting from these wise investments. As a result, Dragonchain has become a more comprehensive blockchain company, providing customers with extensive services.
Investigation of Dragonchain: SEC Dispute Over DRGN Securities
The U.S. Securities and Exchange Commission (SEC) has initiated an investigation into Dragonchain Inc. for their distribution of digital tokens, dubbed DRGNs. The SEC postulates that these tokens could be categorized as securities, yet Dragonchain disputes this classification. In anticipation of potential legal action before the expiration of the relevant statute of limitations in April 2021, Dragonchain preemptively published a rebuttal to the SEC’s claims regarding security finance laws on the internet. The SEC is currently determining whether or not Dragonchain has acted in violation of applicable regulations in this regard.
Exempting Dragonchain’s ICO: Professional Analysis
Dragonchain successfully argued that the U.S. Securities and Exchange Commission’s regulations surrounding Initial Coin Offerings (ICOs) did not apply to their case, as they had an existing product and business operation at the time of the launch. To ensure legal compliance, Dragonchain sought counsel from specialists in securities and intellectual property law before beginning the ICO process, and subsequently filed a provisional patent on the token model in August 2017. The team also examined the four Howey factors closely, making it evident that there was no investment involved with Dragonchain’s offering – purchasers simply gained access to a utility token software micro-license through payment via Bitcoin or Ethereum, both of which are legally classified as money.
No Profit Guarantee: Dragonchain’s DRGN Licensing Rules Explained
Dragonchain has taken steps to ensure that consumers are not misled when purchasing their DRGN micro-licenses. They have outlined a legal agreement stating that the capped quantity and uncapped contribution by purchasers diminish any possibility of a profit expectation. Factors such as pricing make it difficult to accurately predict the potential to receive a profit from the purchase of Dragonchain tokens, as their price is unpredictable and can be variable. It is important to note that, despite these efforts, there is still no guarantee of profitability.
Also Read: The Causes & Effects of Delisting of Stocks on Nasdaq
Navigating U.S. Securities Law for Cryptocurrency Offers
Cryptocurrency offerings are not generally eligible for exemptions under the Securities Act of the United States, and it is essential that issuers and participants in the blockchain space understand their responsibilities under U.S. securities law and take the necessary steps to ensure compliance with SEC guidance. For accredited and sophisticated investors, private offerings of cryptocurrency may be available, provided they meet the requirements set by the SEC.
Secure Investment Strategies for Cryptocurrency and DeFi
I can say this with conviction that investing in cryptocurrency and decentralized finance (DeFi) can offer high returns, but comes with the risk of legal, financial and regulatory issues. To ensure your investments remain safe, it is vital to have adequate measures in place such as insurance and banking advice from experts. I also suggest that you regularly audit and monitor the platform, ensure strong corporate governance standards are followed, including segregated accounts and liquidity management. Lastly, having a knowledgeable team of professionals with experience across the entire financial space can help guide you through the complex ecosystem successfully.
Conclusion
The ocean of bitcoin and decentralized finance (DeFi) are deep, as we’ve witnessed in current and previous events. Regulations are constantly being developed, implemented, and updated as both investors and authorities figure out how to handle this new, technology-driven financial environment. Many possible dangers may be readily avoided with the proper legal and regulatory understanding, as well as a strong corporate governance framework. If you want to enter the crazy world of cryptocurrencies and DeFi, ensure you’ve the proper team backing you up and protecting your investment.
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