The US Securities and Exchange Commission (SEC) has accused Zachary Coburn, the founder of decentralized EtherDelta exchange, of operating an unregistered stock exchange. He was fined of $388,000.

USA issue first major fine against cryptocurrency exchange

EtherDelta, a decentralized cryptocurrency trading platform, specialized in trading of ERC20 tokens, were accused of violating US securities laws. According to the US financial regulator, the founder of EtherDelta Zachary Coburn created a trading platform that provides services similar to those of traditional stock exchanges, without having passed the appropriate registration in the US Securities and Exchange Commission. In addition, the SEC noted that the assets traded on EtherDelta also violate US law, as they are mostly categorized as unregistered securities.

“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,” the SEC statement reads.

The SEC fined Coburn with $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty. Coburn stated that he did not want to enter into legal proceedings with the US regulator, and decided to make a deal with the SEC, although he added that he did not admit his guilt. He agreed to pay the fine in full.

SEC promises to speak in "plain English"

Earlier, the US regulator promised to publish a simple and understandable guide for cryptocurrency project founders to determine whether their platform tokens are securities or can be considered as utility tokens.

The guidelines will also spell out recommendations for tokens that are traded on the secondary market.

According to William Hinman, SEC’s director of Corporation Finance, “if someone’s offering an instrument for money or other consideration to a third party, and that third party expects the offerer to generate a return or so something that will increase the value of the coin or token or whatever they want to call it, and there’s that expectation of return, we’re generally going to see that as a securities offering.”