The Securities and Trade Fee (SEC) charged Chicago-based crypto market maker Cumberland DRW for allegedly working as an unregistered securities vendor on Oct. 10.
In response to the SEC’s grievance, Cumberland has traded over $2 billion in crypto labeled as securities since at the very least March 2018.
The company alleges that these actions, carried out by means of Cumberland’s buying and selling platform Marea and over the telephone, violated federal securities legal guidelines meant to guard buyers.
Jorge G. Tenreiro, performing chief of the SEC’s Crypto Belongings and Cyber Unit, said:
“The federal securities legal guidelines require all sellers in all securities to register with the Fee, and those that function within the crypto asset markets aren’t any exception.”
Tenreiro additionally addressed the crypto neighborhood’s claims that tokens ought to be handled as commodities, arguing that Cumberland’s actions handled the sale and provide 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 aid 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 press release posted on X, Cumberland claimed that the SEC is making an attempt to stifle innovation and forestall corporations from participating in crypto.
The market maker said that it will not change its operations following the enforcement motion by the US regulator. Cumberland added:
“We’re assured in our sturdy compliance framework and disciplined adherence to all identified guidelines and laws—whilst they’ve been a shifting goal (it wasn’t way back ETH was claimed to be a safety).”
The doc additionally highlighted that Cumberland acquired a broker-dealer registration in 2019 by means of SEC Chairman Gary Gensler’s steering. 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 said 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:
“Right this moment’s grievance is the primary time the SEC has outlined the particular transactions at difficulty.”
Notably, the doc additionally cited the market manipulation expenses levied by the Commodity Futures Buying and selling Fee (CFTC) in opposition to DRW in November 2013, when Gensler served as its Chair.
The case concluded in December 2018, with Circuit Decide Richard Sullivan ruling that the CFTC did not show that DRW manipulated the market and its claims had been “based mostly on little greater than an ‘earth is flat’-style conviction.”
Cumberland stated the SEC’s newest motion exhibits that registering as a broker-dealer for digital belongings within the US is “only a mirage” and reaffirmed its intention to battle the lawsuit.
Almost $100 million in belongings
Cumberland presently 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.
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