Has a case of Ethereum decentralized exchange EtherDelta (Ether Delta) unregistered securities occurred!?

On November 9, it was revealed that the U.S. Securities and Exchange Commission (SEC) has indicted Zachary Coburn, the founder of EtherDelta, a decentralized cryptocurrency exchange, for operating an unregistered exchange.

Overview of the Unregistered Exchange Case

U.S. stock exchange (SEC) announced that EtherDelta, a cryptocurrency exchange mainly providing ERC20 token trading pairs, functioned as a market for circulating ERC20 tokens that are considered “electronic asset securities,” and stated the following.

It uses order books (trading books) and displays them on sites and uses smart contracts designed on Ethereum.

In the United States (as in Japan), exchanges that offer products that qualify as securities must be registered or have exemption from registration under SEC regulations.

Moreover, since some cryptocurrencies are not recognized as securities, there are exchanges that trade without licenses or qualifications.

However, according to the SEC, most of the trades on EtherDelta (the number of trades exceeded 3.6 million) occurred after a 2017 report stating that certain cryptocurrencies like DAQ tokens could be securities.

Therefore, the SEC regarded EtherDelta as problematic for continuing to trade while acknowledging that the cryptocurrencies/tokens being traded were securities, and this led to the indictment.

Zachary Coburn, founder of the exchange, has been ordered by the SEC to pay a total of $388,000 (about 44 million yen), including restitution for improper gains.

Without approving or denying the investigation results, Coburn agreed to the order and will pay $300,000 in restitution, $13,000 in interest and $75,000 in penalties.

Quoted:SEC: “The SEC charges the founder of EtherDelta for operating an unregistered exchange”

Impact on the Cryptocoin Market

This unregistered securities exchange case had a significant impact on Bitcoin prices.

First, at 0:15 JST on November 9, Coindesk tweeted a breaking news update about the case.

Then, about 20 minutes later, the U.S. Securities and Exchange Commission also revealed the incident on Twitter.

Immediately after the reports above started circulating, Bitcoin prices fell sharply in two waves at 0:19 and 0:44, briefly recovering due to short selling but then plunging again from 1:00.

Source:coingecko

As a result, the price at 18:00 on November 9 was 1 BTC = $6,442.29 (about 727,979 yen) with normal volatility maintained.