The Securities and Exchange Commission (SEC) pressed formal charges against Zachary Coburn, the founder of cryptocurrency trading platform EtherDelta, for not registering his company as a national securities exchange.
Required to Register
According to an official press release, the SEC has taken action against the founder of digital token trading platform EtherDelta, Zachary Coburn.
According to the Commission’s order, EtherDelta constitutes an online platform for secondary market trading of ERC20 tokens — most of which are usually issued through an initial coin offering (ICO). Furthermore, the SEC has found that almost all of the orders which have been placed through the platform have taken place after its 2017 DAO Report. According to it, certain digital assets, DAO tokens included, are considered securities and, hence, their trading is subject to the Commission’s requirement that exchange register or qualify for an exemption.
According to Stephanie Avakian, Co-Director of SEC’s enforcement arm, EtherDelta did neither of those, stating:
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.
Fines and Penalties Already Paid
The release also says that Zachary Coburn has already paid $300,000 in disgorgement, $13,000 in prejudgment interest, as well as a $75,000 penalty.
However, he hasn’t admitted to anything and the investigation is continuing. Still, the SEC recognizes his cooperation, stating that it may have prevented an even greater penalty.
According to Steven Peikin, Co-Director of the SEC’s Enforcement Division, existing legislation needs to be followed carefully in order to protect investors in times of “significant innovation.” Noted Peikin:
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.
Do you think the SEC has merit to press charges against EtherDelta? Don’t hesitate to let us know in the comments below!