16 OCT 2024 / ALL REGULATORY UPDATES

SEC vs. Cumberland DRW: Who’s Really Playing by the Rules?

In a bold move, the U.S. Securities and Exchange Commission (SEC) has charged Chicago-based crypto trading firm Cumberland DRW for allegedly operating as an unregistered dealer in the crypto asset market. According to the SEC, Cumberland has been buying and selling over $2 billion in digital assets—which the agency claims are securities—since March 2018, without following registration requirements.

So, what’s the deal? Cumberland, a prominent liquidity provider in the crypto space, allegedly traded crypto assets on various platforms like its own Marea online trading platform. The SEC contends that Cumberland didn’t go through the proper channels, violating Section 15(a) of the Securities Exchange Act of 1934. As a result, the SEC is seeking not only to halt Cumberland's unregistered activities but also to recover ill-gotten gains through penalties and interest.

SEC’s Stance vs. Crypto World’s Response

Jorge G. Tenreiro, the Acting Chief of the SEC’s Crypto Assets and Cyber Unit, has a clear message for the crypto market: “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.” But Cumberland isn’t backing down without a fight! In fact, they’ve been vocal, calling the charges “incredibly frustrating” and arguing that the SEC’s stance on digital assets lacks clarity. They maintain that the rules aren’t straightforward enough to navigate effectively, especially when it comes to crypto-specific issues.

The SEC, on the other hand, is holding firm. They’ve long argued that many cryptocurrencies should be treated as securities, putting them under their jurisdiction. This isn’t their first rodeo, either—the SEC is also in legal tussles with crypto heavyweights Coinbase, Binance, Crypto.com and Kraken on similar grounds.

What’s Next for Cumberland?

Cumberland’s legal troubles are just one of several examples of the SEC’s recent crackdown on crypto trading. The firm, which also faced down a Commodities and Futures Trading Commission (CFTC) lawsuit back in 2018, claims it’s prepared to fight again, stating, “We’re ready to defend ourselves.” But whether Cumberland or the SEC comes out on top, this case is sure to be one to watch as it unfolds.

While some crypto enthusiasts argue that the SEC is overstepping, the SEC contends that its actions are crucial to protecting investors. As always, only time will tell how this standoff affects the crypto industry. Will Cumberland’s bold defense shake things up, or will it be another win for the SEC in their crypto crackdown?

One thing’s for sure: the SEC’s regulatory grip on the crypto world is tightening, and it seems like this saga is just getting started. Stay tuned for more such news and updates and subscribe for a weekly rundown, tailored for today’s professionals on the go, delivered right to you.