Cumberland DRW faces legal action from the SEC for $2 billion in unregistered crypto securities dealings, raising concerns over investor protection.
SEC Targets Cumberland DRW for Unregistered Dealings
The U.S. Securities and Exchange Commission (SEC) has brought charges against Cumberland DRW LLC for operating as an unregistered dealer. The Chicago-based company allegedly traded over $2 billion worth of crypto assets classified as securities, violating federal securities laws. This move by the SEC raises concerns about investor protections in the evolving digital asset market.
Violations Spanning Over Five Years
The SEC claims that Cumberland DRW has been buying and selling crypto assets, classified as securities, since at least March 2018 without registering as required by law. The firm positions itself as a leading liquidity provider in the cryptocurrency market, facilitating transactions either over the phone or through its proprietary platform, Marea.
SEC’s Warning to Unregistered Dealers
According to the SEC’s Crypto Assets and Cyber Unit, all dealers dealing in securities—including crypto assets—must register with the commission. Acting Chief Jorge G. Tenreiro emphasized, “Dealers in the crypto space are not exempt from securities regulations.” The regulatory body also pointed out that Cumberland has profited from its activities while bypassing investor protections that come with proper registration.
$2 Billion in Crypto Securities Transactions
The SEC’s complaint alleges that Cumberland’s transactions involved investment contracts on various third-party crypto exchanges. By not registering, the firm potentially put its investors and the market at risk. The company is now facing charges of violating Section 15(a) of the Securities Exchange Act of 1934, which governs dealer registration for securities.
Legal Action and Penalties
Filed in the U.S. District Court for the Northern District of Illinois, the SEC is seeking permanent injunctive relief, disgorgement, prejudgment interest, and civil penalties against Cumberland DRW. This case adds to growing regulatory scrutiny over the crypto space as authorities aim to enforce compliance with federal laws to protect investors.
SEC’s Perspective
As part of their broader regulatory approach, the SEC continues to highlight the importance of registering all securities dealings, even within decentralized markets like crypto. Cumberland DRW’s case shows that no entity operating in the securities space—whether traditional or digital—is beyond the reach of federal regulations.
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