SEC takes action against unregistered crypto exchange EtherDelta

The US regulator for stock exchanges, the Securities and Exchange Commission (SEC), accuses the EtherDelta founder of operating an unregistered cryptocurrency exchange.

EtherDelta is a so-called 'Decentralized Ethereum Exchange' (DEX). As a DEX, the platform allows investors to exchange Ethereum tokens without the need for an account or exchange-based wallet. The exchange of tokens takes place via smart contracts that are used to execute purchase and sale orders.

The SEC regards tokens as securities under federal law. According to the SEC, the EtherDelta platform is therefore active as an unregistered stock exchange, whereby the investors trade the tokens illegally. According to Stephanie Avakian, co-director of the SEC Enforcement Division, this functionality is reason enough that EtherDelta should have applied to the SEC or requested an exception.

According to the SEC reporting, it is the first time that the authority has taken action against a platform acting as an unregistered stock exchange.

Zachary Coburn, the founder of EtherDelta, settled for $388,000. However, Coburn has not issued a clear statement regarding his recognition or denial of the allegations.

Steven Peikin, also co-director of the SEC Enforcement Division, emphasized the difficult task of the SEC in an innovative industry:

“Today we see a lot of innovation in the securities markets with the use of distributed ledger technology ... but to keep protecting investors, this innovation also requires supervision by the SEC on digital markets and compliance with existing legislation.”