On
February 19, 2020, the U.S. Securities and Exchange Commission announced that
it had settled charges against blockchain technology startup Enigma MPC for
conducting an unregistered offering of securities in the form of an initial
coin offering (ICO). Enigma, based in San Francisco and Israel, has agreed to
return funds to harmed investors and to other relief.
According
to the SEC’s order, Enigma raised approximately $45 million from sales of its
digital assets (called ENG Tokens) in 2017. The SEC’s order finds that ENG
Tokens are securities and that Enigma did not register its ICO as a securities
offering pursuant to the federal securities laws and its ICO did not qualify
for an exemption from the registration requirements.
The
SEC’s order requires Enigma to cease and desist from committing or causing any
violations of the registration provisions of the federal securities laws and imposes
a $500,000 penalty. Enigma agreed to a claims process that would result in a
return of funds to investors who purchased tokens in the ICO. The company also
will register its ENG Tokens as securities and file periodic reports with the
SEC. Enigma consented to the order without admitting or denying its
findings.
Author
David Zaslowsky
Email
David Zaslowsky is partner in the Litigation Department of Baker McKenzie's New York office. He helps companies solve complex commercial disputes in arbitration and litigation, especially those involving cross-border issues and Section 1782 discovery. David has a degree in computer science and, as a result, has worked on numerous technical-related disputes, including, most recently, those involving blockchain and artificial intelligence. In April 2025, Attorney Intel named David one of the top 25 blockchain lawyers in the country. He is the editor of the Firm's blockchain blog and co-editor of the firm's International Litigation & Arbitration Newsletter. David has been included for a number of years in the Chambers USA Guide and Chambers Global Guide for his expertise in international arbitration. He also sits as an arbitrator and is on the roster of arbitrators for a number of arbitral institutions. David sits on the Board and chairs the governance committee of the New York International Arbitration Center, and is a founding member of the International Arbitration Club of New York. For over 35 years, he has written and spoken often on the subjects of arbitration and international litigation.