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.”
JUSTIN and ??♀️??♀️??♀️
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 Highly recommend western media to follow up @coindesk @Cointelegraph pic.twitter.com/eGPm8wor8k — Dovey Wan ? ? (@DoveyWan) August 7, 2019
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).
This is the stock ownership agreement between the Chinese buyers and Zack, obtained by the Police ??? Now we know who the mysterious buyers are
Apparently these folks have NO ACTUAL money for the transaction but use EtherDelta as a front to issue their own ICO for payout pic.twitter.com/RmC8i71USW — Dovey Wan ? ? (@DoveyWan) August 7, 2019
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.”
