The SEC has fined a crypto exchange founder in what is the first registration case handled by the agency. Zachary Coburn, the founder of EtherDelta, is accused of failing to register his firm with the SEC.
The crypto exchange founder gets off with a lower fine
It’s the first time the U.S. Securities and Exchange Commission has handled a case that involves registration. In a statement released on Thursday, Coburn is alleged to have executed over 3.6 million orders for some tokens without registering as an exchange with the SEC.
Without accepting or denying the allegations, the crypto exchange founder agreed to pay a $75,000 fine. Additionally, he will pay another $313,000 in disgorgement and interest. According to the SEC, Corburn’s cooperation helped win him a lower penalty.
EtherDelta acts as a secondary market for trading Ethereum based ERC-20 tokens. It provides a marketplace for buyers and sellers to trade Ethereum tokens that the SEC sees as ‘digital asset securities.’
According to the SEC, the marketplace used an order book, an order book display website and also a smart contract built on 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.”
SEC not happy with how EtherDelta conducted its business
In 18 months, the marketplace performed millions of trades something that did not sit well with the SEC. The agency adds:
“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 to trade of these digital asset securities would be subject to the SEC’s requirement that exchanges register or operate pursuant to an exemption.”
The issue is that the platform did not register as an exchange or file for an exemption.
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