- The SEC charged Chicago-based Cumberland DRW LLC with operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities, violating federal securities laws.
- Cumberland allegedly bought and sold crypto assets offered and sold as securities for its own accounts as part of its regular business, without being registered as a dealer.
- The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against Cumberland.
The Securities and Exchange Commission (SEC) has charged a major crypto trading firm for illegally operating as an unregistered securities dealer. This enforcement action sends a strong signal that crypto firms must follow the same rules as traditional securities dealers.
Background on the SEC’s Allegations
On October 10, 2024, the SEC filed a complaint against Chicago-based Cumberland DRW LLC for buying and selling over $2 billion worth of crypto assets without registering as a securities dealer.
According to the complaint, Cumberland has been actively trading crypto assets on various exchanges since at least March 2018. The company calls itself “one of the world’s leading liquidity providers in crypto assets” and operates 24/7.
The SEC alleges that Cumberland was dealing in crypto assets that qualify as investment contracts under securities laws. By not registering with the Commission, Cumberland deprived investors of important protections.
Details of the SEC’s Charges
The SEC complaint, filed in the Northern District of Illinois, charges Cumberland with violating Section 15(a) of the Securities Exchange Act. This provision requires securities dealers to register with the SEC.
The complaint seeks injunctive relief, disgorgement of profits, interest, and civil penalties. The investigation was led by the SEC’s Market Abuse Unit and Crypto Assets and Cyber Unit.
According to Acting Chief Jorge Tenreiro, registration requirements apply equally to crypto markets. He said the case shows that Cumberland, issuers, and investors treated the relevant crypto assets as securities.
Takeaways from the SEC’s Action
This enforcement action reinforces that crypto assets meeting the definition of securities must comply with longstanding dealer registration rules. It shows the SEC’s willingness to pursue unregistered crypto trading platforms.
Going forward, crypto dealers should evaluate whether their activities require SEC registration. Otherwise, they risk facing significant penalties down the road.
