The Securities and Alternate Fee (SEC) charged Chicago-based cryptocurrency market maker Cumberland DRW with allegedly working as an unregistered securities broker-dealer on October 10.
Based on the SEC grievance, Cumberland has traded greater than $2 billion in cryptocurrencies labeled as securities since a minimum of March 2018.
The company alleges that these actions, performed by way of Cumberland's Marea buying and selling platform and by phone, violated federal securities legal guidelines designed to guard traders.
Jorge G. Tenreiro, Appearing Head of the SEC’s Crypto Belongings and Cyber Unit, mentioned:
“Federal securities legal guidelines require all securities sellers to register with the Fee, and people working in crypto asset markets are not any exception.”
Tenreiro additionally responded to claims from the crypto neighborhood that tokens ought to be handled as commodities, arguing that Cumberland's actions handled the sale and providing of crypto as securities, requiring registration to make sure investor safety.
Moreover, the grievance factors out that the corporate's self-proclaimed position because the main liquidity supplier within the crypto market provides weight to those claims.
On account of the alleged violations, the SEC is in search of a everlasting injunction to cease these actions, disgorgement of earnings Cumberland allegedly earned illegally, in addition to prejudgment curiosity and civil penalties.
Based on Cumberland's web site, the corporate presents liquidity for over-the-counter (OTC) markets for various cryptocurrencies, together with stablecoins, in addition to crypto derivatives and bilateral crypto futures buying and selling.
Cumberland responds
In a press release printed on X, Cumberland claimed that the SEC was attempting to stifle innovation and stop firms from partaking in crypto.
The market maker mentioned it could not change its operations following the enforcement actions taken by the US regulator. Cumberland added:
“We’re assured in our robust compliance framework and disciplined adherence to all identified guidelines and rules, although they’ve been a shifting goal (not way back, ETH was thought of a safety) .”
The doc additionally highlights that Cumberland acquired a dealer registration in 2019 by way of Recommendation from SEC Chairman Gary Gensler. It additional states that the market maker was warned that the license is simply legitimate for buying and selling Bitcoin (BTC) and Ethereum (ETH).
Moreover, Cumberland mentioned it has been in discussions with the regulator for the previous 5 years about its operations, which incorporates sharing written summaries and statements, in addition to interviews with firm employees .
Based on Cumberland:
“At this time’s grievance is the primary time the SEC has described the precise transactions at situation.”
Notably, the doc additionally cited market manipulation costs levied by the Commodity Futures Buying and selling Fee (CFTC) towards DRW in November 2013, when Gensler was its chairman.
The case led to December 2018, with Circuit Decide Richard Sullivan ruling that the CFTC had didn’t show that DRW had manipulated the market and that its claims have been “primarily based on little greater than perception “the Earth is flat” sort.
Cumberland mentioned the SEC's newest motion reveals that registering as a digital asset dealer in the US is “only a mirage” and reaffirmed his intention to struggle the lawsuit.
Practically $100 million in belongings
Cumberland at the moment holds greater than $81.5 million in crypto, with many of the funds – $44.2 million – held in Bitcoin, primarily based on knowledge from Arkham Intelligence.
The market maker additionally holds practically $24 million in ETH and over $12 million in stablecoins cut up between Tether USD (USDT) and USD Coin (USDC).
Moreover, Cumberland holds $6.3 million in AAVE and practically $9 million in cUNI, that are UNI tokens staked on the Compound Cash Market, primarily based on Nansen knowledge.
