Enigma MPC, formerly known as Newton Security Labs, has settled charges leveled by the Enforcement Division of the Securities and Exchange Commission regarding an initial coin offering (ICO). The SEC had accused Enigma of conducting an unregistered securities offering. Enigma raised $45 million by selling 75 million ENG tokens to about 6000 investors in 2017.
Enigma, based in San Francisco and Israel, has decided to return funds to “harmed investors” while committing to filing periodic reports with the SEC and paying a $500,000 penalty. Enigma consented to the order without admitting or denying its findings.
Founded in 2015, Enigma altered its business model in 2017 to utilize the Enigma protocol to develop a business that operated as both a data marketplace and platform to test digital asset trading strategies. The ICO was pursued to raise the funds necessary to build the service.
According to the complaint, Enigma paid promoters to pump the offering that started in June 2017 and continued through September 11, 2017.
Enigma allegedly conducted a one-day “Crowd Sale” on September 11, 2017, and sold tokens to the general public.
The SEC adds that ultimately Enigma filed a Form D with the Commission for what it stated were “sale and issuance of rights to receive ENG tokens in the future” via SAFTs.
The SEC DAO report, the line in the sand moment for ICO issuers, was posted by the Commission in July 2017 and thus Enigma crossed the virtual regulatory line. Enigma tokens were delivered in October 2017.
John T. Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office, commented on the settlement:
“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. 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.”
Enigma has agreed to a claims process that would result in a return of funds to investors who purchased tokens in the ICO.
SEC v. Enigma MPC 33-10755
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