EtherDelta’s Founder Has Been Fined by The SEC for Operating an Unregistered Exchange
Zachary Coburn, the founder of EtherDelta, a popular decentralized trading platform for Ether and Ethereum-based tokens has been fined by the SEC for operating an unregistered crypto exchange. A recent report made it known that an agreement has been reached between both parties to pay a fine of $313,000 in disgorgement and interest, amongst other fees.
EtherDelta Only Lists Ethereum and ERC20 tokens
EtherDelta is a DEX that functions just like any other crypto exchange, but with some exception, such as, only listing Ethereum and ERC 20 tokens. The exchange works basically by bringing buyers and seller of these tokens together. There they can make trades through the combined use of “an order book, a website that displayed orders, and a “smart contract” run on the Ethereum blockchain.”
From information from the exchanges official website, it was stated that:
“EtherDelta’s smart contract was coded to validate the order messages, confirm the terms and conditions of orders, execute paired orders, and direct the distributed ledger to be updated to reflect a trade.”
Based on a report from the SEC, EitherDelta which was officially launched in 2017 has executed over 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws.
According to the press release from the agency, EtherDelta has been in violation of rules and guideline put in place in the SEC’s 2017 DAO report. The commission made it clear that the exchange was offering trading of specific assets that have been previously defined as securities in the 2017 report.
Co-Director of the SEC’s Enforcement Division, Stephanie Avakian also commented on the exchanges’ offense. He stated that:
“EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption,”
Steven Peikin, Co-Director of the SEC’s Enforcement Division also stated that:
“We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology,”
Coburn to Pay Fine
So far, Coburn has been indifferent towards the accusations leveled against him. He neither confirmed nor denied them. He has however agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.
