SEC Charges EtherDelta Founder For Operating Unregistered Exchange

 

 

 

 

The Securities and Exchange Commission (SEC) has settled with EtherDelta founder Zachary Coburn for the charge of operating an unregistered national securities exchange, according to a Nov. 8 press release from the enforcement agency.

EtherDelta served as a secondary market for trading of ethereum-based ERC20 tokens, usually issued through Initial Coin Offerings (ICOs). It is the SEC’s view that at least some of the traded cryptocurrency assets were securities under US Federal law.  

The settlement will see Coburn — who did not admit nor deny any wrongdoing — pay $300,000 in disgorgement, $13,000 in pre-judgement interest, and a $75,000 penalty. The investigation is ongoing.

The charges are the first of their kind against any cryptocurrency trading platform, and the charges are a likely indicator that the SEC will shift its attention towards other much larger trading platforms that have allowed US customers to trade ICOs that are securities under US law.

The SEC’s director of Corporate Finance, William Hinman said earlier in the week that the enforcement agency would release ‘plain English’ guidelines to classifying digital securities, including those that are already issued and trading. If this clarification broadly captures all, or nearly all ICOs as investment contracts the way the law was designed to, then many exchanges and their founders could be looking at a challenging couple of years ahead.  

Author: Timothy Goggin

Timothy Goggin is an economic analyst with an interest in the application of moral philosophy and decentralized systems. He studied economics at the Business School at Victoria University of Wellington, New Zealand. His area of research is the consequential and moral dimensions of implementing digital currencies and the resulting synergies for consumers in the trading environment.

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