SEC Charges Cumberland DRW LLC

The U.S. Securities and Exchange Commission (SEC) announced that Cumberland DRW LLC operated as an unregistered dealer while trading $2 billion in cryptocurrencies.

The Chicago-based firm, identifying itself as a "liquidity provider, a risk taker" and a "latency-sensitive trading firm," faced charges on Thursday for functioning as an "unregistered dealer," according to the SEC statement.

Jorge G. Tenreiro, acting chief of the SEC’s Crypto Assets and Cyber Unit, stated, "Despite frequent industry claims that crypto asset sales are akin to commodity sales, our complaint alleges that Cumberland, issuers, and investors treated these crypto assets as securities, profiting from dealer activity without providing necessary investor protections."

Starting in March 2018, Cumberland has traded at least $2 billion worth of crypto that the SEC argues were sold as securities. The complaint notes that Cumberland primarily conducts its trading through the online platform Marea, which was launched in early 2019.

The SEC claims that Cumberland profited millions by trading with investors while evading the protections offered by federal securities registration laws. The agency seeks disgorgement and civil monetary penalties against the firm.

Additionally, the SEC classified five cryptocurrencies as securities: POL, SOL, ATOM, ALGO, and FIL. It mentioned that trading platforms like Cumberland play a critical role in markets by disseminating information about these assets, framing them as investments.

In response, Cumberland stated it has become "the latest target of the SEC's enforcement-first approach." The firm mentioned it has been discussing compliance with the SEC for five years and has shared necessary materials with the agency.

Cumberland asserted, "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. We stand confident in our compliance framework, even as regulations evolve."

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