The Securities and Exchange Commission today announced 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 via a claims process, register its tokens as securities, file periodic reports with the SEC, and pay a $500,000 penalty.

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. 

“All investors are entitled to receive certain information from issuers in connection with a securities offering, whether it involves more traditional assets or novel ones,” said John T. Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “The remedies in today’s order provide ICO investors with an opportunity to obtain compensation and provide investors with the information to which they are entitled as they make investment decisions.”

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. 

The SEC’s case was handled by Michael Vito, Emily R. Holness, Marc Jones, Eric A. Forni, and Amy Gwiazda of the Boston Regional Office.