SEC charges decentralized exchange, EtherDelta, for operating unregulated cryptocurrency exchange

Special Report SEC  INVESTIGATIONS

EtherDelta, which operates a trustless exchange where it only provides a platform for users to trade, failed to register with the regulator or file for an exemption, the agency stated.

In what could prove to be a groundbreaking case, the US Securities and Exchange Commission has charged the founder of cryptocurrency trading platform EtherDelta, Zachary Coburn, with running an "unregistered national securities exchange". In the future, it is clear the SEC will continue to levy enforcement actions against ICOs and exchanges that operate without complying with USA regulations. According to statistics from the SEC, over an 18-month period, there were over 3.6 million orders placed on EtherDelta.

The agency stated in its press release that nearly all of EtherDelta's orders were placed after the SEC issued its 2017 DAO Report.

"We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology, but to protect investors, this innovation necessitates the SEC's thoughtful oversight of digital markets and enforcement of existing laws."

The Security and Exchange Commission (SEC) of the United States charged the decentralized exchange (DEX), EtherDelta, for operating an exchange without registering it.

According to the agency, the majority of the trading activity in question has been made on the EtherDelta exchange after the SEC in the "2017 DAO Report" made it clear that some digital assets could be considered "securities", and that anyone who offers trading in these assets therefore are subject to SEC registration requirements.

Stephanie Avakian, co-director of the SEC's Enforcement Division, spoke on the charges against EtherDelta, arguing that it was mandatory for the platform to register with the SEC as it had "both the user interface and underlying functionality of an online national securities exchange".

The enforcement action by the SEC comes just a week after it was reported that the agency had initiated a nationwide crackdown in the U.S. on what it deems to be potential misconduct involving cryptocurrencies. According to the agency, a part of those ICO tokens were traded on EtherDelta.

Without admitting or denying the SEC's findings, Coburn agreed to pay $300,000 in disgorgement in addition to $13,000 in prejudgement interest and a $75,000 penalty.

The Commission's order also recognizes Coburn's cooperation, which the Commission considered in its determination not to impose greater penalties.

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