The Securities and Exchange Commission settled charges against the founder of a digital token trading platform.

This is the SEC’s first enforcement action based on findings that such a platform operated as an unregistered national securities exchange.

Zachary Coburn, a former registered representative with Chicago-based options trading firm Optiver, founded the digital token trading platform EtherDelta in July 2016. According to the SEC’s order, EtherDelta is an online platform for secondary market trading of ERC20 tokens, which is 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.

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 happened after the SEC issued its so-called DAO Report, the investigative report notifying market participants that digital assets are subject to federal securities laws. The report was issued July 25, 2017.

According to this report, platforms that offered trading of these digital asset securities would be subject to the SEC’s requirement that exchanges register or operate pursuant to an exemption.

However, EtherDelta offered trading of various digital asset securities and failed to register as an exchange or operate pursuant to an exemption, the SEC says.

“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,” Stephanie Avakian, co-director of the SEC’s Enforcement Division, said in a statement.

According to the SEC, EtherDelta provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders, and a “smart contract” run on the Ethereum blockchain.

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.

According to Steven Peikin, co-director of the SEC’s Enforcement Division, this is a time of “significant innovation” in the securities markets with the use and application of distributed ledger technology.

“But to protect investors, this innovation necessitates the SEC’s thoughtful oversight of digital markets and enforcement of existing laws,” Peikin said in a statement.

Without admitting or denying the findings, Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty. The SEC’s order recognized Coburn’s cooperation, which the Commission considered in determining not to impose a greater penalty.

The SEC has previously brought enforcement actions relating to unregistered broker-dealers and unregistered ICOs, including some of the tokens traded on EtherDelta.

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