SEC charges Cumberland DRW with acting as 'unregistered dealer' in crypto transactions

Quick Take

  • Cumberland DRW LLC was charged on Thursday for conducting itself as an “unregistered dealer.”
  • The charges are the latest move by the U.S. SEC cracking down on the crypto industry. 

The U.S. Securities and Exchange Commission said Cumberland DRW LLC acted as a dealer without being registered when trading $2 billion of cryptocurrencies. 

The Chicago-based company, which calls itself a "liquidity provider, a risk taker" and a latency-sensitive trading firm," was charged on Thursday for conducting itself as an "unregistered dealer," the SEC said in a statement. 

"Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the offer and sale of the crypto assets at issue in this case as investments in securities, and Cumberland profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration," said Jorge G. Tenreiro, acting chief of the SEC’s Crypto Assets and Cyber Unit, in a statement.

Starting in March 2018, Cumberland bought and sold at least $2 billion worth of crypto that the SEC says were sold and offered as securities, according to the complaint. The SEC said Cumberland mostly does its trading through an online trading platform platform called Marea, which it launched in early 2019. 

"Cumberland thus has reaped millions of dollars in ill-gotten gains by trading with investors while depriving them and the markets of the protections of the federal securities laws’ registration provisions," the SEC said. The agency said it seeks disgorgement and civil money penalties. 

The SEC also labels five cryptocurrencies as securities in the complaint — POL, SOL, ATOM, ALGO and FIL. 

"Crypto asset trading platforms, such as Cumberland, are an integral part of the markets for MATIC because they fill these markets with information, republishing and amplifying the issuer and promoter statements and activity promoting MATIC as an investment," the SEC said in the complaint.

The agency made similar statements about FIL, SOL, ATOM, ALGO. 

Cumberland pushed back on Thursday and said it has become "the latest target of the SEC's enforcement-first approach," in a statement released on its X account. The firm said it had been in discussions with the SEC for five years and shared materials with the agency. 

"We are not making any changes to our business operations or the assets in which we provide liquidity as a result of this action by the SEC," Cumberland said. "We are confident in our strong compliance framework and disciplined adherence to all known rules and regulations — even as they have been a moving target (it wasn't long ago ETH was claimed to be a security.)" 

Update: Oct. 10, 5:45 p.m. UTC to include details throughout


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Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.

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