SEC Charges EtherDelta Founder for Operating Unregistered Exchange

SEC Charges EtherDelta Founder for Operating Unregistered Exchange

The Securities and Exchange Commission said Thursday it reached a settlement with the founder of a digital-token trading platform for operating an unregistered exchange.

The regulator reached a settlement with EtherDelta founder Zachary Coburn, who in 2016 launched the EtherDelta website as a platform for trading blockchain-based tokens—known as ERC20 tokens—the SEC said. ERC20 is a standard coding protocol often used in initial coin offerings.

This is the first time the SEC has targeted a cryptocurrency exchange, and what is known in the crypto sector as a “decentralized” exchange. Essentially, EtherDelta was a piece of software that allowed users to trade with each other directly, as opposed to a centralized business like a traditional stock market that facilitates trading.

Mr. Coburn, without admitting or denying the SEC’s accusations, will pay $300,000 in disgorgement, a $75,000 penalty and $13,000 in prejudgment interest, the SEC said. The regulator said it took Mr. Coburn’s cooperation into consideration when deciding on his penalty.

“We are pleased with the result,” said Greg Lisa, an attorney for Mr. Coburn, in a statement. “The Commission recognized that there was no fraud involved, or even alleged.”

Mr. Coburn didn’t respond to requests for comment.

The enforcement action is another indication that the commission is focused more on the impact a business has, not how it is organized or how its operators describe it. It also shows that the commission will target individuals. A common argument against regulation in the cryptocurrency space is that coders are just writing software, and aren’t responsible for the effects of the software. The action against Mr. Coburn illustrates that the commission rejects that line of thinking.

The SEC said that it had issued a report last year that said platforms that trade these types of tokens, among other assets, had to be registered. Over 3.6 million orders for ERC20 tokens were carried out by EtherDelta users over 18 months, which also included tokens that are considered securities, the SEC said.

Write to Allison Prang at and Paul Vigna at

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