The SEC (Securities and Exchange Commission) has accused the decentralized exchange EtherDelta of operating an unregistered exchange business. The SEC says that EherDelta was functioning as a securities exchange without a license. Many of the currencies traded there are securities. Zachary Coburn, owner, and founder of Ether Delta settled out of court.
EtherDelta Sanctioned As An Unregistered Exchange
EtherDelta, one of the most used and respected ethereum decentralized exchanges was surprisingly tackled by the SEC. They were accused of running an unregistered securities exchange by more than 18 months. The SEC points two things to support this claim.
First is the design of the site. Yes, it could be a decentralized token (or security token), but the whole interface and its functionality refer to the functioning of a real exchange. The PR statement from the SEC declares that:
“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,”
said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.
The second fact is simple. Many of the cryptocurrency tokens that are part of the trading volumes in this decentralized, ethereum based exchange are classified as security tokens and faced this kind of sanction also. This would be the first punitive action after this sanction of the SEC.
EtherDelta Paid It Up
But instead of fighting the case, Zachary Coburn, the founder, and CEO of EtherDelta opted by making an arrangement. He managed things sidestepping courts and such by paying a hefty sum of money to the SEC.
The PR clearly states that:
Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.
While regulations and certain considerations are not clear enough today, the SEC still needs to be ever vigilant about these operations, even if the regulatory march does not define clearly what a security is.
SEC Over Regulations
The regulatory weather in the USA has not been the clearest. The SEC has not even issued a PR to explain what kind of tokens are securities and which are not.
This dire situation is so intense that even cryptocurrency giants like Coinbase went to Congress. There they advocated for clearer and transparent regulations in the cryptocurrency spaces.
In another document outed by them, focused into measuring the efficiency of the resources used by the SEC, they reveal that ICO’s are a big source of cryptocurrency scams and schemes and that they are becoming the main worry for the organization.