In a sign of continued enforcement activity involving cryptocurrency products and services, the SEC fined Zachary Coburn, the founder of EtherDelta, for operating an unregistered national securities exchange. EtherDelta is an online trading platform for blockchain-based tokens, some of which are securities under federal law.

EtherDelta operates as a marketplace that brings together buyers and sellers through the combined use of an order book, a website that displays orders, and a “smart contract” run on the Ethereum blockchain. The smart contract validates the order messages, confirms the terms and conditions of orders, executes paired orders and directs the distributed ledger to be updated to reflect the trade. Due to these features, the SEC concluded that EtherDelta has both the user interface and underlying functionality of an online national securities exchange. However, the SEC did not identify which tokens were securities or provide any analysis about why those digital assets were securities.

Nearly all of the token trades covered in the SEC’s investigation took place after the issuance of the 2017 DAO Report in which the SEC concluded that certain digital assets (including tokens) were securities. Consequently, EtherDelta was subject to the SEC’s requirements of either registering as an exchange or operating pursuant to an exemption.

Although Coburn didn’t admit or deny the regulator’s findings, he consented to the order and agreed to pay $300,000 in disgorgement, $13,000 in prejudgment interest and a $75,000 penalty. The SEC noted Coburn’s cooperation in deciding not to impose a higher penalty.

The SEC has previously brought numerous enforcement actions relating to unregistered broker-dealers and unregistered ICOs, including some of the tokens traded on EtherDelta. Meanwhile, its investigation is continuing, and it signaled in its annual enforcement report that it would focus its enforcement efforts on misconduct involving initial coin offerings and digital assets.

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