Blockchain startup Enigma has reached a settlement with the U.S. Securities and Exchange Commission (SEC) over the initial coin offering it conducted in 2017.
The startup, based in the U.S. and Israel, raised about $45 million during an initial coin offering of its ENG Tokens in the summer and fall of 2017, according to a statement released Wednesday by the SEC.
The goal of the fundraising, Enigma claimed at the time, was to build a digital asset trade-testing platform and a marketplace for data.
However, regulators at the SEC ultimately determined that the ENG token should be classified as a security and went on to allege that Enigma conducted an unregistered offering of securities.
Enigma "consented to the order without admitting or denying its findings," the statement said. Enigma also accepted a $500,000 penalty and agreed to a claims process that lets investors who participated in the ICO reclaim their funds. Moreover, Enigma will register its tokens as securities and will periodically report to the SEC.
"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."
Enigma further announced Wednesday that its mainnet has been launched, with more than 20 validators currently operating on the network.
"This settlement, which is the culmination of an extended series of discussions with the SEC, clears the way for our development team to return its full attention and energy to our original and continued vision: building groundbreaking privacy solutions that improve the adoption and usability of decentralized technologies, for the benefit of all," Enigma said in a statement. "With the settlement behind us, we can again push forward and meaningfully advance the Enigma protocol – as evidenced by today’s news of the successful launch of the first Enigma mainnet."