The Securities and Trade Fee (SEC) charged Chicago-based crypto market maker Cumberland DRW for allegedly working as an unregistered securities seller on Oct. 10.
In response to the SEC’s grievance, Cumberland has traded over $2 billion in crypto categorized as securities since at the very least March 2018.
The company alleges that these actions, performed by Cumberland’s buying and selling platform Marea and over the cellphone, violated federal securities legal guidelines meant to guard buyers.
Jorge G. Tenreiro, appearing chief of the SEC’s Crypto Belongings and Cyber Unit, acknowledged:
“The federal securities laws require all dealers in all securities to register with the Commission, and those who operate in the crypto asset markets are no exception.”
Tenreiro additionally addressed the crypto group’s claims that tokens ought to be handled as commodities, arguing that Cumberland’s actions handled the sale and supply of crypto as securities, necessitating registration to make sure investor safety.
Furthermore, the grievance highlighted that the corporate’s self-described function as a number one liquidity supplier within the crypto market provides weight to those claims.
Because of the alleged violations, the SEC seeks everlasting injunctive reduction to halt these actions, the disgorgement of earnings Cumberland allegedly gained unlawfully, plus prejudgment curiosity and civil penalties.
In response to Cumberland’s web site, the agency presents liquidity for over-the-counter (OTC) markets for various cryptocurrencies, together with stablecoins, in addition to crypto derivatives and bilateral buying and selling of crypto forwards.
Cumberland responds
In a assertion posted on X, Cumberland claimed that the SEC is attempting to stifle innovation and stop corporations from partaking in crypto.
The market maker acknowledged that it might not change its operations following the enforcement motion by the US regulator. Cumberland added:
“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 (it wasn’t long ago ETH was claimed to be a security).”
The doc additionally highlighted that Cumberland acquired a broker-dealer registration in 2019 by SEC Chairman Gary Gensler’s steerage. It additional states that the market maker was warned that the license is simply legitimate for Bitcoin (BTC) and Ethereum (ETH) buying and selling.
Moreover, Cumberland acknowledged that it has been in talks with the regulator for the previous 5 years about its operations, which incorporates sharing written summaries and statements, in addition to interviews with the agency’s personnel.
In response to Cumberland:
“Today’s complaint is the first time the SEC has outlined the specific transactions at issue.”
Notably, the doc additionally cited the market manipulation prices levied by the Commodity Futures Trading Fee (CFTC) towards DRW in November 2013, when Gensler served as its Chair.
The case concluded in December 2018, with Circuit Choose Richard Sullivan ruling that the CFTC did not show that DRW manipulated the market and its claims had been “based on little more than an ‘earth is flat’-style conviction.”
Cumberland mentioned the SEC’s newest motion exhibits that registering as a broker-dealer for digital belongings within the US is “just a mirage” and reaffirmed its intention to combat the lawsuit.
Practically $100 million in belongings
Cumberland at the moment holds over $81.5 million in crypto, with a lot of the funds — $44.2 million — held in Bitcoin, based mostly on Arkham Intelligence knowledge.
The market maker additionally holds almost $24 million in ETH and over $12 million in stablecoins divided between Tether USD (USDT) and USD Coin (USDC).
Moreover, Cumberland holds $6.3 million in AAVE and almost $9 million in cUNI, that are UNI tokens staked on the cash market Compound, based mostly on Nansen knowledge.
