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.