SEC clamps down on major decentralised exchange EtherDelta

Marco Green
November 9, 2018

Cobrun decided not to register the exchange with the Commission and as a result he was aware of EtherDelta's violations. It appears EtherDelta didn't get the memo though.

However, this time, Zachary Coburn, the founder EtherDelta, has settled charges with the SEC over failing to properly register the exchange, the commission said in a press release on Thursday.

The release also noted that the SEC had taken enforcement actions against a handful of tokens that had once traded on the exchange.

One of the first popular decentralized exchanges, EtherDelta was founded in 2017 and saw extreme popularity throughout 2017 and 2018, being built entirely on an Ethereum smart contract. Their inability to affect the state of EtherDelta itself represents a continual strength in decentralized exchanges, however - the smart contract where users hold funds and execute trades is unable to be affected, and mirrors like ForkDelta allow for safer ways to access the exchange's services. More than 3.6 million buy and sell orders in ERC20 tokens, including securities, were facilitated by the exchange from 12th July 2016 and 15th December 2017.

The agency stated in its press release that nearly all of EtherDelta's orders were placed after the SEC issued its 2017 DAO Report. The report concluded that certain digital assets, such as DAO ERC20 tokens, were treated as securities and that any platforms that offered these securities would be subject to SEC's registration requirements.

Nearly all of the orders placed through EtherDelta's platform were traded after the SEC's 2017 DAO report, which stated that they regarded a number of ICO tokens as securities.

The filing further notes that EtherDelta purportedly brokered most of these transactions after the SEC issued a report warning that cryptocurrency exchange platforms are required to register 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", added Steven Peikin, co-director of the SEC's Enforcement Division.

The enforcement action by the SEC comes just a week after it was reported that the agency had initiated a nationwide crackdown in the USA on what it deems to be potential misconduct involving cryptocurrencies.

Mr. Coburn consented to the SEC's order and agreed to pay $300,000 in disgorgement as well as $13,000 in prejudgment interest along with a $75,000 penalty.

Other reports by Click Lancashire

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