Chinese Police Allegedly Investigating Decentralized Exchange EtherDelta

On Wednesday, August 7, which also happens to be known as "Chinese Valentine's Day", Dovey Wan, a Founding Partner of blockchain-focused venture investment firm Primitive Ventures, reported that Chinese police are investigating an alleged "exit scam" involving a token listed on decentralized exchange (DEX) EtherDelta.

EtherDelta is a DEX that was founded by Zachary Coburn. It is mainly a trading platform for Ethereum tokens (ERC-20), which have "traditionally" been used in Initial Coin Offerings (ICOs). Being a DEX means having no fixed location or server.

On 8 November 2018, the U.S. Securities and Exchange Commission (SEC) issued a press release saying that it had charged the EtherDelta founder with "operating an unregistered exchange."

The press release went on to say:

Without admitting or denying the findings, Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.

According to Wan's tweets from earlier today:

  • "EtherDelta is involved in a major scam in China, police officially take legal action against it... The actual beneficiaries of EtherDelta are all Chinese after ownership transition in 2017"
  • "Basically Zack Coburn sold EtherDelta to a group of Chinese who later issued exchange token $EDT and turned out to be a exit scam... Now furious investors of $EDT whistle blowed to local police the case was recently taking into official investigation process"
  • "FYI Chinese police shows no mercy if any crypto scam involved large amount of retail capital"

We will update this article as the story develops...

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