SEC accuses Cumberland DRW of being an unregistered dealer
The Securities and Exchange Commission (SEC) has accused the Chicago company Cumberland DRW LLC of operating as an unregistered dealer.
According to the SEC, the company conducted transactions with crypto assets totaling more than $2 billion, which were offered and sold as securities. This constitutes a violation of registration requirements under federal securities laws.
SEC claims that since March 2018, Cumberland has been buying and selling crypto assets for its own accounts as part of its regular business practice, acting as an unregistered dealer. Cumberland positions itself as a "liquidity provider" in crypto assets and operates around the clock, trading with counterparties over the phone or through its online platform Marea.
The lawsuit also alleges that Cumberland trades crypto assets that are offered as investment contracts on third-party crypto exchanges.
"Federal laws require all securities dealers to register with the Commission, and those operating in the crypto asset markets are no exception. Despite industry claims that selling crypto assets is akin to selling goods, our lawsuit asserts that Cumberland, issuers, and investors viewed crypto assets as investments in securities, and Cumberland profited from its dealer activities without providing investors and the market the protections afforded by registration."
Jorge G. Tenreiro, Acting Chief of the SEC's Crypto Assets and Cybersecurity Unit (CACU)
The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, accuses Cumberland of violating Section 15(a) of the Securities Exchange Act of 1934. SEC seeks a court injunction, restitution of ill-gotten gains, payment of interest, and penalties.
The investigation was conducted by Andrew McFall from the SEC's Market Abuse Unit and Kathleen Hitchins from CACU under the supervision of Amy Flaherty Hartman, Paul Kim, and Mr. Tenreiro. The litigation will be handled by Christopher Martin and Timothy Stockwell under the direction of Jack Kaufman and Mr. Tenreiro.