The US Securities and Exchange Commission (SEC) sanctioned Zachary Coburn, founder of Ethereum’s decentralized Ethereum (ETH) and ETH tokens exchange platform, EtherDelta, with $388,000, alleging that the startup operated as an unauthorized cryptocurrency exchange. The regulator said Thursday, November 8th, that EtherDelta “was required to register with the SEC or qualify for an exemption.”
In the press release, the SEC said this is the first action it has taken “based on the findings that the platform operated as a national means of exchanging unlicensed securities.” Also, the officials said EtherDelta provided a market for buyers and sellers to exchange tokens “using an order book, an order display website, and a smart contract based on Ethereum (ETH).”
The US regulators noted that, over an 18-month period, EtherDelta crypto exchange’s users executed more than 3.6 million orders for ERC20 tokens, “including tokens that are securities under federal securities laws.”
The US Securities and Exchange Commission (SEC) Fined EtherDelta Ethereum (ETH) Crypto Exchange For Operating Without A License
The US Securities and Exchange Commission’s decision marks a precedent that could impact the creation and development of decentralized crypto exchange projects. Stephanie Avakian, co-director of the SEC’s Enforcement Division, noted that “EtherDelta had both the user interface and the underlying functionality of a national online stock exchange and was required to register with the SEC or qualify for an exemption.”
Without admitting or denying the facts, Zachary Coburn agreed to pay $388,000 in penalties broken down into $300,000 in profit returns, $13,000 in interest, plus a fine of $75,000.
EtherDelta attracted media attention back in December 2017 when its platform was hacked, putting users’ information and funds at risk. The system is used to exchange Ethereum (ETH), the Ethereum blockchain’s native cryptocurrency, as well as other tokens created on this network, known as the ERC20 tokens, among others.