Obtain the file from this site (not from sourceforge), place it in your moodle root and unzip.
So, if moodle is installed in /var/www/moodle and zip is dm.zip, place dm.zip in /var/www/moodle and unzip dm.zip
this is NOT typical behavior for Moodle plugins which typically prepend the name of the plugin. Dragmath has been repackaged to add necessary moodle files and place all files where they are supposed to go if directions are followed. Please review moodle docs on dragmath.