The US Securities and Exchange Commission (SEC) has filed charges against the founder of the platform for trading cryptocurrency tokens EtherDelta, Zachary Coburn in the operational management of the unregistered stock exchange for the sale of securities.
The regulator’s statement says that the decentralized EtherDelta Exchange served as a secondary market for trading ERC-20 standard tokens, which the SEC regards as “digital securities”.
SEC Charges EtherDelta Founder With Operating an Unregistered Exchange https://t.co/KYRBmn2UHw
— SEC_News (@SEC_News) November 8, 2018
In particular, the platform gave buyers and sellers the opportunity to make deals using the bid book, the site for displaying bids and a smart contract developed on the basis of Ethereum.
“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,” the SEC message said.
The regulator stresses that virtually, all transactions on EtherDelta were carried out after the SEC report of 2017, in which it recognized TheDAO tokens as securities, and the exchange was not registered with the SEC and did not apply for elimination in the context of federal laws about securities.
“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,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.
As noted, Coburn did not admit but did not reject his guilt. Nevertheless, he agreed to return the illegally obtained profit in the amount of $300,000 to the state, as well as to pay $13,000 in interest for the period before the court decision and $75,000 fine. The Office also noted that Coburn collaborated with the investigation, which resulted in a reduction in the amount of the fine.
This case is also notable for the fact that it was the first of its kind, which concerns the stock exchange, on which there were never transactions in fiat currencies. SEC also makes it clear that it equates almost all Ethereum tokens to securities.