Chinese Police Investigating EtherDelta Over Exit Scam

The exchange’s founder was charged by the SEC last year.

Chinese police have reportedly initiated an investigation against crypto trading platform EtherDelta for its involvement in an exit scam.

Revealed by Dovey Wan, the founding partner at blockchain-focused investment firm Primitive Ventures, the non-custodial trading platform was sold by its founder Zack Coburn to a group of Chinese “who later issued exchange token $EDT and [which] turned out to be an exit scam.”

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Police were informed of the scam by “furious investors” of the token.

Wan also shared a snapshot of the ownership agreement signed between Coburn and the Chinese buyers. She also alleged that the new owners of the exchange bought it with the intent to use it as a “front” to issue their initial coin offering (ICO).

EtherDelta is one of the most controversial exchanges in the crypto market. Built on the Etherum blockchain, it allowed the listing of any ERC-20 tokens. It allows users to trade cryptocurrency without the need to register an email or password – in fact, people do not need to sign up at all.

A gentle slap by the SEC?

Last year, the US Securities and Exchange Commission (SEC) charged the founder of the decentralized exchange for operating an unregistered securities exchange. Coburn was eventually slapped with a fine of $300,000 in disgorgement, with another $13,000 in pre-judgment interest and a $75,000 penalty.

Wan pointed out that, unlike the US where Coburn got away with only a fine, “Chinese police shows no mercy if any crypto scam involved large amount of retail capital.”

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