coincentral-main-menu-search-eyeglass
Hamburger X.

EtherDelta Founder Charged with Operating Unregistered Securities Exchange

sec-etherdelta

This morning, the United States Security and Exchange Commission (SEC) announced formal charges against EtherDelta founder Zachary Coburn for operating an unregistered national securities exchange. The SEC order explains that EtherDelta facilitates the trading of ERC20 tokens, many of which they deem to be securities. 

The charge comes on the heels of the 2017 DAO Report. This report outlines certain types of digital assets that the SEC considers to be securities, including DAO tokens. It’s implied that at least some of the tokens being traded on EtherDelta fell into this category. Over the last 18 months, users on EtherDelta performed more than 3.6 million trades, with many involving security-classified tokens.

EtherDelta Interface

EtherDelta Interface

Although EtherDelta executes trades automatically through smart contracts and stays non-custodial regarding user funds, the SEC still argues that the exchange (and the founder behind it) is at fault. Co-director of the SEC’s Enforcement Division Steven Peiken explains, “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.”

On news of the charges, Coburn agreed to pay the nearly $400,000 in fines and penalties. The investigation is still ongoing.

The Implication

Previously, it was thought that decentralized exchanges (DEXs) like EtherDelta were out of reach of any jurisdiction. Well, this now appears to be false. Although the decentralized nature of certain exchanges may prevent them from getting shut down, any type of known figurehead runs the risk of getting in some serious trouble. 

Additionally, a charge of this magnitude (EtherDelta was at one point the largest DEX around), shows that the SEC means business. They’ve moved beyond going after the most obvious scams now to companies/projects that the majority of the cryptocurrency industry has considered legitimate. 

With this EtherDelta charge, it’s clear that the entire cryptocurrency industry is going to have to start taking the SEC’s threats seriously – whether they want to or not.

NEWSLETTER

Newsletter (Sidebar)

  • This field is for validation purposes and should be left unchanged.

RELATED ARTICLES

Bitcoin taxes

Understanding Cryptocurrency Taxes: How to Calculate Your Bitcoin Taxes 101

You made big money trading Bitcoin but you don't know how to calculate your...

Read More

How to Buy Bitcoin and Other Popular Cryptocurrency

With the prices of Bitcoin (BTC) and other altcoins (alternative cryptocurrencies) surging as cryptos become more mainstream,…

Read More
Bitcoin has failed to break out into the $10K territory for the second week and is set to shatter a flurry of price predictions by industry analysts.

Bitcoin Price Predictions, Uncovering the Real Crypto Market Drivers

Editor’s note: Bitcoin’s price has since broken a new all-time high of $22.3k. This article is still…

Read More

NEXT ARTICLE

Getting Started Gold Bars.

NEXT ARTICLE

Should You Use Multiple Cryptocurrency Wallets?

As more people enter the cryptocurrency ecosystem than ever, it’s important to rehash a few common concerns about keeping cryptocurrency safe.  Many beginner to intermediate-level users wonder whether or not they should have a dedicated cryptocurrency wallet for each digital asset.  One of the best ways to guarantee security, beyond taking the usual precautions like…

ABOUT THE AUTHOR

Getting Started Gold Bars.

ABOUT THE AUTHOR

Based in Austin, TX, Steven is the Executive Editor at CoinCentral. He’s interviewed industry heavyweights such as Wanchain President Dustin Byington, TechCrunch Editor-in-Chief Josh Constine, IOST CEO Jimmy Zhong, Celsius Network CEO Alex Mashinsky, and ICON co-founder Min Kim among others. Outside of his role at CoinCentral, Steven is a co-founder and CEO of Coin Clear, a mobile app that automates cryptocurrency investments. You can follow him on Twitter @TheRealBucci to read his “clever insights on the crypto industry.” His words, not ours.