Securities and Exchange Commission (SEC) charged Chicago-based Cumberland DRW LLC for operating as an unregistered crypto dealer. The complaint involves more than $2 billion in crypto trades, allegations the company termed as an “enforcement-first approach to stifling innovation.”

Alleged Violations

The SEC alleged that the crypto liquidity provider has been buying and selling crypto assets offered as securities without proper registration since at least March 2018.

According to the complaint, the firm has acted as an unregistered dealer, routinely engaging in transactions for its own accounts. This activity, according to the SEC, took place on third-party exchanges and through Cumberland’s trading platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term, Marea.

However, the company has criticized the regulators' decision, saying the approach stifles competition. Cumberland added that it has engaged the SEC in a “good faith” discussion on the matter. It added that the transactions in question did not require registration as a broker-dealer.

“At issue in our case is the SEC’s view that some of our transactions involving certain crypto assets were securities transactions. We have engaged in five years of good-faith discussions with the SEC on this point. On our end, we have shared dozens of written summaries and statements, produced thousands of pages of materials, and made our senior management and compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term personnel available for many hours of interviews.”

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— Cumberland (@CumberlandSays) October 10, 2024

However, the SEC, led by the Crypto Assets and Cyber Unit, contends that the crypto assets in question were treated as investment contracts, a type of security requiring proper registration.

SEC’s Legal Action

The SEC’s complaint was filed in the US District Court for the Northern District of Illinois. It charges Cumberland DRW with violating Section 15(a) of the Securities Exchange Act of 1934, which mandates that all securities dealers be registered.

Commenting about the matter, Jorge Tenreiro, the Acting Chief of the SEC’s Crypto Assets and Cyber Unit, mentioned: “Despite frequent protestations by the industry that sale of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the sale of the crypto asset at issue in this case as investments in securities.”

In the lawsuit, the regulator sought permanent injunctive relief against the company, the return of any profits gained from the alleged activities, prejudgment interest, and civil penalties.