- SEC charges Cumberland DRW with operating as an unregistered dealer, violating federal laws.
- The firm allegedly traded over $2 billion in crypto assets since 2018.
- The SEC seeks penalties, including disgorgement of profits and a permanent injunction.
The U.S. Securities and Exchange Commission (SEC) filed a legal action against Chicago-based Cumberland DRW LLC on October 10. The firm is accused of operating as an unregistered crypto dealer and violating federal securities laws.
According to the press release, Cumberland allegedly has transacted over $2 billion in crypto-asset instruments since 2018 without proper registration. The complaint was filed in the U.S. District Court for the Northern District of Illinois. The main charge of the Commission is basically under Section 15(a) of the Securities Exchange Act, 1934.
Cumberland is accused of not being registered as a dealer even though it has regular transactions of crypto assets that have been considered securities. In so doing, the firm has opened itself up to penalties that also may include disgorgement of profits, prejudgment interest, and civil monetary fines.
Alleged Violation of Federal Securities Laws
Pretending to be a major liquidity provider in the crypto market, Cumberland allegedly operates 24/7 and trades with counterparties around the globe on the phone and online through its online platform, Marea. The complaint points out that such trades were from assets offered and sold as investment contracts and that the defendant profited from such activities without provision for the necessary investor protection under federal law.
The SEC contends that crypto-asset transactions were securities, and the firm treated them as such, while the industry had been claiming digital assets were commodities. The Commission wants to enforce that all dealers in securities, including crypto assets, register for the purpose of investor protection.
SEC’s Ongoing Legal Strategy
The complaint was filed with substantial assistance from the SEC’s Crypto Assets and Cyber Unit, which is headed by Acting Chief Jorge. G. Tenreiro. The investigation was conducted by members of the Market Abuse Unit and CACU, led by Amy Flaherty Hartman and Paul Kim, respectively.
As part of the ongoing case, the SEC now seeks permanent injunctive relief-whipping Cumberland into possibly permanent non-operation for improper registration of its businesses and to take financial penalties for all the alleged violations.
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