US SEC Charges Cumberland DRW With $2B Unregistered Crypto Sales

Highlights
- Cumberland DRW LLC charged by SEC for $2B unregistered crypto trading since March 2018.
- SEC alleges Cumberland operated as an illegal dealer in crypto securities on proprietary platform Marea.
- Ripple and Crypto.com challenge SEC’s broad classification of crypto as securities.
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. According to the SEC, the company conducted over $2 billion in crypto asset transactions, which were offered and sold as securities, without the required registration. The agency claims that Cumberland violated federal securities laws designed to protect investors.
US SEC Charges Cumberland DRW
The regulator’s complaint alleges that since at least March 2018, Cumberland has been acting as an unregistered dealer, buying and selling crypto assets classified as securities for its own account.
The US SEC, in addition claims that Cumberland publicly promotes itself as “one of the world’s leading liquidity providers” and operates 24/7 through telephone and its online platform, Marea.
According to the Securities and Exchange Commission, Cumberland regularly trades crypto assets, which are considered investment contracts, on third-party exchanges. The SEC argues that this activity makes the firm a securities dealer, and its failure to register violates Section 15(a) of the Securities Exchange Act of 1934.
Agency Position on Crypto as Securities
Jorge G. Tenreiro, Acting Chief of the Securities and Exchange Commission’s Crypto Assets and Cyber Unit (CACU), emphasized the need for crypto dealers to register with the SEC. 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 arguments from the crypto industry that digital assets should be treated as commodities, the regulator has maintained that many crypto assets meet the legal definition of securities. This case is part of the SEC’s broader effort to enforce compliance with securities laws in the crypto market.
The complaint was filed in the U.S. District Court for the Northern District of Illinois, and the agency seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
Ripple and Crypto.com Push Back Against Regulation
This case as a result adds to the growing friction between the agency and key players in the crypto industry. Ripple, which is engaged in a legal battle with the regulator, recently filed a cross-appeal challenging the Securities and Exchange Commission classification of its XRP token as a security. Ripple CEO Brad Garlinghouse consequently criticized the agency’s enforcement 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.”
The firm has, however made progress in its case, with a recent ruling determining that some XRP sales were not securities. However, the Securities and Exchange Commission is expected to appeal. Ripple’s cross-appeal aims to ensure that all issues related to investment contracts in the XRP context are resolved.
Additionally, Crypto.com has filed a lawsuit against the SEC, accusing the agency of overstepping its jurisdiction. This move came after the platform received a Wells notice from the SEC, signaling that some tokens on its platform might be classified as securities. Crypto.com, similarly, argues that the regulator is unlawfully expanding its reach, claiming that nearly all crypto assets are being unfairly labeled as securities.
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