SEC Charges Market Maker Cumberland for $2B Unregistered Securities Offering

The United States Securities and Exchange Commission (SEC) has announced charges against crypto market maker Cumberland DRW for illegally engaging in the buying and selling crypto assets the regulator deemed securities.

SEC’s Claim

In a press release on Thursday, the agency explicitly stated that Cumberland operated as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities “in violation of the registration requirements of the federal securities laws that are designed to protect investors.”

According to the SEC, Cumberland has acted as an unregistered dealer since March 2018 by buying and selling crypto assets that the agency deemed as securities and trading them as investment contracts on third-party crypto exchanges as part of its regular business.

“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,” Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit (CACU) said in the complaint.

The SEC’s complaint charges Cumberland with violating Section 15(a) of the Securities Exchange Act of 1934 and seeks “permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.”

Cumberland Reacts

In response to the SEC’s complaint, a spokeswoman for Cumberland described the SEC’s actions as “incredibly frustrating and disappointing.”

“Despite (SEC) Chairman (Gary) Gensler’s call to just ‘come in and register,’ Cumberland has for years been expressly prohibited from using its now-dormant registered broker-dealer for crypto asset activity. We cannot comply with rules that do not exist or a framework that regulators are interpreting to prohibit trading in natively issued crypto assets,” the spokeswoman said in a statement.

In an X post, Cumberland called SEC action an “enforcement-first approach to stifling innovation” and preventing legitimate companies from engaging in crypto.

Cumberland also noted that it will not change its business operations as it registered as a broker-dealer in 2019.