EtherDelta founder Zachary Coburn is the latest victim of the SEC’s clampdown on cryptocurrency exchanges, having been hit with a $388,000 fine for operating an unregistered securities exchange. In its ruling, the SEC noted that Coburn was responsible for certain critical aspects of the creation and operation of the exchange, as well as not registering EtherDelta with them.
EtherDelta was a hugely popular site during the historic 2017 bull run, often listing ERC20 tokens before other exchanges. This was until a hack in December 2017 brought its success to an abrupt end, from which it never recovered.
Coburn Avoids Jail
In its ruling, the SEC stated that by creating a platform where buyers and sellers could engage in transactions, and also by writing the smart contract that handled these transactions, Coburn was technically running an exchange. Despite not having much further impact on the site’s operations, the charge has remained. They also stated that Coburn should have registered EtherDelta following their DAO report in July 2017, but failed to do so. With 92% of transactions being conducted after this report, things look more damning.
Coburn was hit with three separate fines, but his punishment was reduced due to the “…remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff.”
Truly Decentralized?
The news of an individual being held accountable for a supposedly decentralized exchange came as a surprise to the cryptocurrency community. The same issue arose when IDEX decided to block New York IP addresses from using their exchange, revealing that it was only partially-decentralized despite calling itself the “only Ethereum decentralized exchange”. However, Coburn’s interaction with EtherDelta didn’t stretch to much more than the setting up of the smart contract and the designing of the platform, with all transactions being taken care of automatically. This means that he had no control over the exchange’s servers and most operations. This suggests that EtherDelta was and is a decentralized exchange, at least far more so than IDEX.
The SEC was recently revealed to have been expanding the scope of their cryptocurrency crackdown, and last week’s ruling may turn out to be the first of many such cases.
