The U.S Securities and Exchanges Commission has charged and heavily fined, Zachary Coburn, for setting up a digital trading platform that allows traders to buy and sell tokens that have been marked as 'securities’ by the regulators.
The SEC also labeled the platform as an “unregistered national securities exchange” in a press release on Thursday.
As revealed in the release, the alleged platform is EtherDelta's website on which ERC-20 tokens from ICO projects are exchanged by filling and executing orders. Some security tokens for which the regulators have enforced actions in the past were among the 3.6 million orders fulfilled by EtherDelta within the last 18 months.
Stephanie Avakian, Co-Director of the SEC's Enforcement Division said in the release,
"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,"
There would be no excuse for EtherDelta since the regulatory body released a 2017 DAO report which explained what kind of tokens they will consider as security. DAO Tokens launched in the same year, fall into this category as well as some other security tokens available on the EtherDelta platform.
The release confirmed that Zachary Coburn refused to admit or deny the SEC findings and instead opted to pay the penalty for going against the regulatory law. To this course, he agreed to hand to the SEC, $300,000 worth of proceeds from the token exchange (disgorgement), plus $13,000 in prejudgment interest and a $75,000 penalty.
At the time of writing this report, the EtherDelta platform belonging to Coburn is still in operation. Investigations are still reportedly ongoing while a final decision on whether the platform will continue to exist is yet to be announced by the regulators.