The U.S. Securities and Exchange Commission (SEC) has charged Zachary Coburn, the creator of the decentralized crypto token exchange EtherDelta. The SEC fined the Etherdelta founder because the exchange platform operated as an unregistered national securities exchange.
SEC reported Thursday that EtherDelta, which is a decentralized exchange based on a smart contract on the Ethereum network and operates for trading ERC-20 tokens, had been running a marketplace to exchange Ethereum tokens between buyers and sellers providing an order book displayed in a website which is based on an Ethereum smart contract according to a press release.
The project aims to build a trading platform and is supported, among others by billionaire VC fund Tim Draper.
“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.” Said the release
Additionally, they pointed to the date of the DAO report concluding that some tokens traded on the platform are securities saying:
“Over an 18-month period, EtherDelta’s users executed more than 3.6 million orders for ERC20 tokens, including tokens that are 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,”
Stephanie Avakian, Co-Director of the SEC’s Enforcement Division said:
“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,”
He was charged to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty. Mr. Coburn already paid the fine and cooperated in order to get a lower penalty noted SEC.
Despite the news might have a huge impact on DEX projects, at the time of writing the news did not have any impact on the Ethereum price.