On November 8, the SEC announced that it settled charges against Zachary Coburn, founder of EtherDelta, a type of non-custodial digital asset trading platform commonly referred to as a “decentralized exchange” or “DEX.” Coburn was charged with causing EtherDelta to operate as an unregistered securities exchange in violation of Section 5 of the Securities Exchange Act of 1934 (the “Exchange Act”) during the period between July 12, 2016 (the date Coburn launched EtherDelta’s website) and December 15, 2017 (the date Coburn ceased collecting fees from EtherDelta users following its sale to foreign buyers).
The conclusions set forth in the SEC’s order contain several key components, including that, during the relevant period:
- EtherDelta operated as an “exchange” within the meaning of the Exchange Act;
- Coburn “caused” EtherDelta to violate the Exchange Act; and
- At least some of the digital assets bought and sold on EtherDelta were “securities.”
We analyze these findings in more depth below.