EtherDelta Facing Investigation Over Exit Scam in China

EtherDelta Under Investigation in China for Possible Exit Scam

The decentralized exchange switched ownership, leading up to a token-based exit scam.

EtherDelta, one of the earliest and most widely used decentralized exchanges, is under investigation in China, local sources reported. A filing has been made to explore the nature of the scam, based on the sale of a token.

https://twitter.com/DoveyWan/status/1159166185516089344

Dovey Wan, co-founder and managing partner of Primitive, noted the first filings on the case, related to an earlier token sale. Wan noted that the Russian founder of Ether Delta, Zack Coburn, sold the exchange to its new owners in 2017. Jun Chen has been mentioned as one of the new owners of EtherDelta.

The new team issued the EDT token, a native exchange-based asset, which ended up in an exit scam. The criminal investigation and the involvement of the Chinese police force were an attempt to redress relatively large-scale personal financial losses, commented Wan.

EtherDelta has crossed the law in the past, especially the US regulations on crypto assets. Coburn was then ordered to pay a compensation of $300,000, with an additional interest rate of $13,000 and an additional fine of $75,000, for reportedly running an unregistered security exchange in a US jurisdiction. The US Securities and Exchange Commission thus created the conditions for Coburn to sell the exchange.

The exchange started to block New York-based IP addresses, despite being decentralized, as it turned out there was a central entity behind the market platform. The EtherDelta market has been a boon to ICOs and small-scale token projects, which managed to build liquidity.

The EDT token is currently inactive, with the last known price of $0.00024. The tokens created were 1.5 billion, but the exact number of participants in the token sale is unknown. The token sale coincided with the transfer of ownership between Coburn and the new Chinese owners about a year ago.