SEC Charges EtherDelta Founder For Operating Unregistered Exchange
The U.S. Securities and Exchange Commission has issued a cease and desist order against Zachary Coburn, the founder of crypto token trading platform EtherDelta for operating it as an unregistered national securities exchange.
According to the SEC’s order, EtherDelta is an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in Initial Coin Offerings (ICOs).
EtherDelta provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders, and a “smart contract” run on the Ethereum blockchain.
The decentralized ER20 token exchange was the leading Ethereum DEX during its peak, executing more than 3.6 million orders over an 18-month period. According to the SEC, many of those orders were for unregistered security tokens.
SEC found that EtherDelta offered trading of various digital asset securities and failed to register as an exchange or operate pursuant to an exemption.
“We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology. But to protect investors, this innovation necessitates the SEC’s thoughtful oversight of digital markets and enforcement of existing laws,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.
The SEC has previously brought enforcement actions relating to unregistered broker-dealers and unregistered ICOs, including some of the tokens traded on EtherDelta, but this is the SEC’s first enforcement action based on findings that such a platform operated as an unregistered national securities exchange.
SEC said in a press release that Coburn agreed to pay $300,000 in disgorgement, $13,000 in prejudgment interest and a $75,000 penalty.
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