Munchee Inc. (defendant) launched an iPhone application (app). Munchee sought to finance improvements to its app by selling a MUN digital token. In October 2017, Munchee announced an initial coin offering (ICO) of the MUN token. In connection with the ICO, Munchee issued a white paper describing its intent to use the token sale proceeds to run its business, promote the app, and develop and maintain the token’s ecosystem. Specifically, Munchee stated that (1) the development of an ecosystem would cause the tokens to increase in value, (2) Munchee intended for token buyers to be able to trade the tokens on a secondary market soon after the ICO, and (3) token buyers could purchase goods and services with MUN tokens once the ecosystem was established. The white paper further stated that Munchee had determined that the token sales did not pose a significant risk of violating the federal securities laws because the tokens were not securities under the United States Supreme Court’s decision in Securities and Exchange Commission v. W.J. Howey Co. On October 31, Munchee began selling MUN tokens, which were not registered with the Securities and Exchange Commission (SEC) (plaintiff). Approximately 40 people purchased MUN tokens that day, for an aggregate amount of approximately $60,000, which they paid with virtual currency. However, Munchee never delivered tokens to these purchasers. Instead, on November 1, Munchee halted sales after being contacted by the SEC. The SEC initiated a cease-and-desist proceeding against Munchee based on the SEC’s view that the MUN tokens were investment contracts and thus securities. Munchee offered to settle the matter. The SEC accepted Munchee’s offer.