As a seasoned crypto investor with over a decade of experience in this dynamic and often unpredictable market, I have seen my fair share of regulatory scrutiny and industry shake-ups. The recent accusations against Cumberland DRW LLC by the SEC as an “unregistered dealer” is yet another reminder of the ever-evolving landscape of digital assets.
The U.S. Securities and Exchange Commission (SEC) is intensifying its supervision of the cryptocurrency sector by accusing Cumberland DRW LLC of functioning as an “unlicensed broker”, a move that emphasizes the agency’s persistent enforcement strategy, which has faced growing criticism from industry players and supporters in the digital currency field.
Accused Of Trading $2B In Crypto As ‘Unregistered Dealer’
On Thursday, I’m disclosing information about allegations against Cumberland DRW, a company based in Chicago. The Securities and Exchange Commission (SEC) claims that they traded over $2 billion worth of cryptocurrency assets, which were marketed and exchanged as suspected “securities”. This trading activity, according to the SEC, violated federal registration requirements intended to safeguard investors. In simpler terms, I’m saying that the SEC believes Cumberland DRW broke the rules by trading billions of dollars in cryptocurrencies that should have been registered under federal law to protect investors.
According to the charges brought by the SEC, Cumberland is said to have been conducting such business activities, functioning effectively as an unregistered broker, since at least March 2018. This includes purchasing and selling digital assets on behalf of their own accounts within the scope of their regular business transactions.
The company’s website states that they offer substantial and dependable liquidity in cryptocurrencies, along with technology investments. They boast of having extensive experience spanning over several decades in this particular field.
Cumberland DRW is open about being a major global provider of liquidity in the digital asset trading market, offering services 24/7 and carrying out transactions with partners over the phone and their online platform, Marea.
Additionally, Cumberland provided immediate access to crypto market liquidity for numerous digital currencies, including stablecoins, catering to a multitude of institutional investors. The firm’s services extended beyond just spot trading, encompassing derivatives such as options and futures contracts, bilateral crypto option agreements, and non-deliverable forward contracts.
SEC Seeks Penalties Against Cumberland DRW
The SEC further alleges that Cumberland has been trading crypto assets treated as investment contracts on third-party exchanges. Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, stated:
Under U.S. securities regulations, anyone dealing in any type of security must be registered with the Commission. This includes individuals working within the crypto asset market as well.
According to the head of the digital assets division at the SEC, while some in the industry argue that cryptocurrency asset sales are similar to commodity sales, the SEC’s lawsuit contends that Cumberland, the sellers, and investors perceived these transactions as investments in securities. Furthermore, Tenreiro claimed:
In simpler terms, Cumberland made money from dealing with these specific assets without ensuring the necessary safeguards for investors and the public market through registration.
The SEC’s complaint was filed in the US District Court for the Northern District of Illinois and charges Cumberland with violating Section 15(a) of the Securities Exchange Act of 1934. The agency is seeking permanent injunctive relief, recovery of ill-gotten gains, prejudgment interest, and civil penalties against the firm.
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2024-10-10 22:52