U.S. SEC Charges Cumberland DRW LLC

The U.S. Securities and Exchange Commission (SEC) announced that Cumberland DRW LLC acted as a dealer without being registered while trading $2 billion worth of cryptocurrencies.

Cumberland, a Chicago-based firm identifying itself as a "liquidity provider, a risk taker, and a latency-sensitive trading firm," was charged for operating as an "unregistered dealer."

Jorge G. Tenreiro, acting chief of the SEC’s Crypto Assets and Cyber Unit, stated, "Despite frequent protestations by the industry that sales of crypto assets are 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. Cumberland profited from its dealer activity in these assets without providing important protections afforded by registration."

The SEC's complaint indicates that starting in March 2018, Cumberland bought and sold at least $2 billion worth of crypto that the SEC classifies as securities. The firm primarily engages in trading through an online platform known as Marea, launched in early 2019.

According to the SEC, "Cumberland 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 seeks disgorgement and civil money penalties against Cumberland.

Additionally, the SEC has identified five cryptocurrencies as securities in its complaint: POL, SOL, ATOM, ALGO, and FIL. The SEC noted that trading platforms like Cumberland play a vital role in cryptocurrency markets, amplifying issuers and promoters' statements that promote these assets as investments.

Cumberland has responded by claiming it is the latest target of the SEC's enforcement-first approach. The firm insists that it has been in discussions with the SEC for five years and has shared necessary materials with the agency. Cumberland added, "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 are confident in our strong compliance framework and disciplined adherence to all known rules and regulations — even as they have been a moving target."

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