- The SEC has sued market maker Cumberland for offering and selling unregistered securities.
- The regulator says Cumberland violated U.S. securities laws by operating as an unregistered dealer.
The U.S. Securities and Exchange Commission (SEC) has filed suit against Cumberland DRW LLC, a Chicago-based cryptocurrency market maker, alleging it acted as an unregistered dealer of securities.
The SEC said in a press release dated October 10 that Cumberland bought and sold more than $2 billion worth of crypto assets starting in March 2018. According to the agency, those activities constituted offers and sales of securities under U.S. law.
Investment securities
In the SEC’s account, Cumberland provided the crypto assets from its own accounts, which the regulator says means the firm effectively operated as an unregistered dealer. The complaint highlights how Cumberland described itself as a “leading liquidity provider” and carried out trades with counterparties either by phone or through its Marea online platform.
“Despite repeated industry assertions that crypto sales are akin to commodities transactions, our complaint alleges that Cumberland, the relevant issuers, and targeted investors treated the offers and sales of the crypto assets at issue here as investments in securities,” said Jorge G. Tenreiro, acting chief of the SEC’s Crypto Assets and Cyber Unit. Tenreiro added that Cumberland profited from these activities but failed to provide investors and the broader market with the protections that registration with the regulator is designed to deliver.
SEC seeks permanent injunction against Cumberland
In a complaint filed in the U.S. District Court for the Northern District of Illinois, the SEC alleges violations of Section 15(a) of the Securities Exchange Act of 1934. The agency is seeking a permanent injunction against Cumberland, disgorgement of ill-gotten gains, and a civil monetary penalty.
This enforcement action follows a separate criminal case announced one day earlier in which U.S. prosecutors charged multiple individuals and companies in connection with alleged market manipulation and fraud. The filing against Cumberland comes amid heightened regulatory and enforcement scrutiny of crypto market participants.
Other recent developments include a motion filed by Ripple following the SEC’s decision to appeal in its own enforcement matter, and a lawsuit brought by Crypto.com against the SEC after the exchange received a Wells notice from the regulator. These cases reflect a continued focus by U.S. authorities on how crypto trading and related services are treated under securities laws.