SEC Settles With EtherDelta for Operating Unregistered Exchange

“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.

— Related on ThinkAdvisor:

• SEC Takes Action Against Digital Token Offering
• Does Any Token Exist That Is Not a Security?