SEC Charges Cumberland DRW for Operating as an Unregistered Dealer in the Crypto Asset Markets

The Securities and Exchange Commission today 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, in violation of the registration requirements of the federal securities laws that are designed to protect investors.

According to the SEC’s complaint, since at least March 2018 through the present, Cumberland has acted as an unregistered dealer by buying and selling crypto assets offered and sold as securities for its own accounts as part of its regular business. As alleged in the complaint, Cumberland publicly calls itself “one of the world’s leading liquidity providers” in crypto assets and operates 24 hours a day, seven days a week by trading with counterparties by the telephone or through its online trading platform, Marea. The SEC’s complaint further alleges that Cumberland engages in trading crypto assets that are offered and sold as investment contracts on third-party crypto asset 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,” said Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit (CACU). “Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the offer and sale of the crypto assets at issue in this case as investments in securities, and Cumberland profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration.”

The SEC’s complaint, filed in U.S. District Court for the Northern District of Illinois, charges Cumberland with violating Section 15(a) of the Securities Exchange Act of 1934. The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

The SEC’s investigation was conducted by Andrew McFall of the SEC’s Market Abuse Unit and Kathleen Hitchins of the CACU and supervised by Amy Flaherty Hartman, Paul Kim, and Mr. Tenreiro of the CACU. The SEC’s litigation will be led by Christopher Martin and Timothy Stockwell and supervised by Jack Kaufman and Mr. Tenreiro.