Zachary Coburn, the founder of EtherDelta, has been charged by the SEC for operating an unregistered exchange, states a press release from the financial regulator.
As the SEC reports, EtherDelta is an online trading platform for ERC20 tokens. Mr. Coburn has operated EtherDelta as an unregistered national securities exchange.
The smart contracts used by the algorithm of the exchange were built on the Ethereum blockchain network. As the SEC describes:
“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.”
The clients of EtherDelta have executed more than 3.5 million orders for the ERC20 tokens over a period of an year and a half, including those tokens that are classified as securities by the federal securities law.
The problem with EtherDelta was the fact that while it allowed trading for the tokens, it failed to register itself with the regulator or at least file for an exemption, which was allowed under certain rules, as described by the SEC in their press release.
For now, the founder of EtherDelta has not confirmed the allegations. He has paid more than $300,000 in disgorgement, a $75,000 fine and an additional $13,000 in the so-called prejudgement interest. Coburn has cooperated with the SEC and probably there will be no additional penalties for the founder.