Chinese authorities are reportedly investigating EtherDelta for pulling an exit scam on its users. The decentralized exchange’s (DEX) token ‘EtherDelta Token’ was issued by its Chinese owners but issuers seem to have disappeared. The story is still developing.
Dovey Wan, a founding partner of Primitive Ventures, has reported on an ongoing investigation in China involving the decentralized exchange EtherDelta. EtherDelta, being one of the oldest DEXs, was sold to unnamed Chinese investors in 2017.
EtherDelta Investors in the Dark
In the succeeding months since the acquisition, the new management team decided to issue its own token for EtherDelta called ‘EtherDelta Token’ (EDT). However, the token issuers appear to have disappeared leaving many investors in the dark. Now, these wronged users are turning to local Chinese authorities to begin an official investigation.
Chinese authorities are known for showing no mercy for scams involving retail investors. EtherDelta will likely face heavy charges and may be shut down permanently.
EtherDelta is a non-custodial marketplace which is intended to be a decentralized trading platform. Specializing in ERC20 tokens, transactions all take place on-chain and through smart contracts. However, the exchange has been embroiled in controversy since at least 2018, when the United States Securities and Exchange Commission (SEC) charged the exchange’s founder, Zachary Coburn, of operating an exchange without a license. As a result, Coburn agreed to pay a $75,000 penalty and $13,00 in prejudgement interest.
Exit Scam or Failed Project?
It’s still unclear what the outcome of the Chinese investigation will be or who the identities of the so-called ‘owners’ are. The EtherDelta token has been trading since at least September of 2018 but has had abysmally-low volume. The token peaked at $0.0017 around that time, but has since completely collapsed which has led investors to label it as an ‘exit scam.’