Home News Exchange SEC Charges EtherDelta Founder for Operating Unregistered Exchange

SEC Charges EtherDelta Founder for Operating Unregistered Exchange

November 09, 2018 11:49
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The Securities and Exchange Commission (SEC) has charged EtherDelta founder Zachary Coburn, of operating an unregistered exchange. This is one of the first enforcement action carried out by the SEC. The regulatory body stated in its charge that EtherDelta was an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in Initial Coin Offerings (ICOs). The order found that Coburn caused EtherDelta to operate as an unregistered national securities exchange.

The investigation is being carried out by Daphna A. Waxman of the Division’s Cyber Unit and Alison R. Levine and Jorge G. Tenreiro of the New York Regional Office.


According to the press release issued by the SEC, users on EtherDelta  executed more than 3.6 million orders for ERC20 tokens, including tokens that are deemed securities under the federal securities laws. Almost all of the orders placed through EtherDelta’s platform were traded after the Commission issued its 2017 DAO Report, which concluded that certain digital assets, such as DAO tokens, were securities and that platforms that offered trading of these digital asset securities would be subject to the SEC’s requirement that exchanges register or operate pursuant to an exemption. EtherDelta offered trading of various digital asset securities and failed to register as an exchange or operate pursuant to an exemption.

Stephanie Avakian, co-Director of the SEC’s Enforcement Division said, “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.”

Oddly enough, without either protesting or accepting the veracity of the charges, Coburn accepted the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty. The Commission’s order recognizes Coburn’s cooperation, which the Commission considered in determining not to impose a greater penalty.

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