US SEC has charged Cumberland DRW with violating securities laws by transacting over $2 billion in crypto assets as an unregistered dealer.
The U.S. Securities and Exchange Commission (SEC) has charged Chicago-based Cumberland DRW LLC with operating as an unregistered dealer in the crypto asset market.
The SEC alleges that Cumberland carried out over $2 billion in crypto transactions that were sold as securities, without the required registration, thereby violating federal securities laws meant to protect investors.
SEC Charges Against Cumberland DRW
According to the regulator’s complaint, Cumberland has acted as an unregistered dealer since at least March 2018 by buying and selling crypto assets classified as securities for its own account.
The SEC claims Cumberland promotes itself as “one of the world’s leading liquidity providers” and operates 24/7 through both phone and its online platform, Marea.
The agency argues that Cumberland’s regular trading of crypto assets, considered investment contracts, on third-party exchanges makes it a securities dealer.
Its failure to register, the SEC says, constitutes a violation of Section 15(a) of the Securities Exchange Act of 1934.
SEC’s Stance on Crypto as Securities
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit (CACU), underscored the requirement for crypto dealers to register with the Commission.
He stated, “The federal securities laws require all dealers in all securities to register with the Commission, and those who operate in the crypto asset markets are no exception.”
Despite ongoing industry debates over whether digital assets should be treated as commodities, the SEC has consistently argued that many crypto assets fit the legal definition of securities.
This case is part of the SEC’s wider effort to enforce securities laws within the crypto sector.
The complaint, filed in the U.S. District Court for the Northern District of Illinois, seeks permanent injunctive relief, disgorgement of profits, prejudgment interest, and civil penalties.
Pushback from Ripple and Crypto.com
This case highlights the escalating tension between the SEC and prominent crypto firms. Ripple, which is currently embroiled in its own legal battle with the SEC, recently filed a cross-appeal challenging the classification of its XRP token as a security.
Ripple CEO Brad Garlinghouse commented on the SEC’s action against Cumberland, tweeting, “The calls are coming from inside the house… Commissioner Uyeda calls the SEC’s approach to crypto a disaster – and right on cue the agency sues @CumberlandSays for operating as an unregistered securities dealer. This circus needs to end.”
Ripple has made some progress in its case, with a recent ruling that some XRP sales were not considered securities.
However, the SEC is expected to appeal, and Ripple’s cross-appeal seeks to address all outstanding issues regarding XRP’s classification as an investment contract.
Additionally, Crypto.com has also filed a lawsuit against the SEC, accusing it of overreach after the platform received a Wells notice indicating that certain tokens on its platform might be classified as securities.
Crypto.com argues that the SEC is unlawfully expanding its jurisdiction by labeling nearly all crypto assets as securities.
