According to the SEC’s order, EtherDelta is an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in Initial Coin Offerings (ICOs). The order found that Coburn caused EtherDelta to operate as an unregistered national securities exchange.
According to the regulator, EtherDelta founder Coburn neither admitted nor denied the findings, but he consented to cooperate and to pay the state $300,000 in unlawful profits. Moreover, he agreed to pay $13,000 in prejudgment interest and a $75,000 penalty. The SEC also states that it would have imposed a greater fine if Coburn had failed to cooperate with the investigators.
Over an 18-month period, EtherDelta’s users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws. 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. EtherDelta offered to trade of various digital asset securities and failed to register as an exchange or operate pursuant to an exemption.
Stephanie Avakian, Co-Director of the SEC’s Enforcement Division said: “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.”
The SEC suspended securities trading in October of Nevada-based firm American Retail Group, Inc. for making false claims that its cryptocurrency trading activities were approved by the regulator.
In early November, the SEC reported that it is currently taking action against “dozens” of fraudulent Initial Coin Offerings (ICOs). The annual enforcement report for the 2018 fiscal year mentioned several illicit ICOs, three of which defrauded investors of over a combined $68 million.