Chinese police are reportedly taking legal action against non-custodial token trading platform EtherDelta in connection with an apparent exit scam.
The news was reported on Aug. 7 in a series of tweets published by Dovey Wan, founding partner at blockchain-focused investment firm Primitive Ventures.
New Chinese owners allegedly used EtherDelta for exit scam ICO
Wan’s tweets indicate that the alleged exit scam involved the sale of native exchange asset EtherDelta Token (EDT) following the acquisition of the exchange by unnamed Chinese investors:
“The actual beneficiaries of EtherDelta are all Chinese after ownership transition in 2017 [...] Basically [the founder] 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”
Wan added a further tweet, noting that “FYI Chinese police shows no mercy if any crypto scam involved large amount of retail capital.”
Run-in with the U.S. SEC
The exchange had faced legal difficulties in fall 2018 when the United States Securities and Exchange Commission (SEC) charged founder Zachary Coburn with operating an unregistered securities exchange.
Coburn neither admitted nor denied the findings, but he consented to cooperate and to pay the state $300,000 in unlawful profits. Moreover, he agreed to pay $13,000 in prejudgment interest and a $75,000 penalty.
This May, crypto analytics startup Coinfirm found that over 500 of the ether (ETH) stolen from hacked New Zealand-based cryptocurrency exchange Cryptopia — worth over $125,000 — had been moved to EtherDelta.