Blockchain technology startup Enigma MPC settles SEC charges

Maria Nikolova

The regulator has charged Enigma MPC with conducting an unregistered offering of securities in the form of an initial coin offering.

The United States Securities and Exchange Commission (SEC) today announced settling of charges against blockchain technology startup Enigma MPC for conducting an unregistered initial coin offering (ICO).

Enigma MPC, based in San Francisco and Israel, raised approximately $45 million by selling 75 million digital tokens (“ENG Tokens”) in an ICO in the summer and fall of 2017. Enigma and its promoters told investors that Enigma would use the funds raised in the ICO to develop a digital asset trade-testing platform (the “Catalyst Application”) and to build a data marketplace for cryptocurrency-related data. Ultimately, as Enigma told investors, Enigma also planned to use ICO funds to develop a marketplace for other forms of data as well (the “Enigma DataMarketplace” or “DataMarketplace”).

Enigma paid promoters and others to tout Enigma as a good investment opportunity. Among other things, Enigma engaged in a so-called “bounty campaign,” offering ENG Tokens to third parties in exchange for promotion of the Enigma ICO and Catalyst through social media, blogging, or for translating Enigma promotional materials into other languages. Enigma also sought to generate more interest in its ENG Tokens by working to have the token traded on secondary market digital asset trading platforms. Enigma also told prospective ENG Token investors that it was engaged in such efforts.

The SEC’s order states 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. 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 has also agreed to a $500,000 penalty.

Enigma consented to the order without admitting or denying its findings.

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