Zachary Coburn, the founder of crypto token trading platform EtherDelta, has been charged to court by the U.S. Securities and Exchange Commission (SEC) for operating an unregistered securities exchange.
The regulator while making known on Thursday said, EtherDelta, acts as a secondary market for trading ERC-20 tokens and has been providing a marketplace for buyers and sellers to trade ethereum tokens that the SEC deemed to be “digital asset securities.”
He added that, “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.”
EtherDelta users conducted more than 3.6 million trades over an 18-month period “for ERC-20 tokens, including tokens that are securities under the federal securities law,” according to the release, which went on to add:
“Almost all of the orders placed through EtherDelta’s platform were traded after the Commission issued its 2017 DAO Report, which concluded that certain digital assets, such as DAO tokens, were securities and that platforms that offered trading of these digital asset securities would be subject to the SEC’s requirement that exchanges register or operate pursuant to an exemption.”
According to the SEC, the platform did not register as an exchange or file for an exemption.
Stephanie Avakian, SEC Division of Enforcement co-director, while speaking noted that, “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.”
The statement further stated that, Coburn has already settled the charges, although he neither denied nor admitted the charges against him; however, he did pay $300,000 in disgorgement, $13,000 in pre-judgement interest and a $75,000 penalty.
The SEC noted that Coburn cooperated with the regulator, resulting in a lower penalty than may have otherwise been administered.