U.S. SEC Charges Cumberland DRW for Operating As an Unregistered Crypto Dealer

On 10 October, the U.S. Securities and Exchange Commission (SEC) announced that it had filed a civil enforcement action against Chicago-based Cumberland DRW LLC, the crypto-focused subsidiary of DRW Holdings, LLC, a diversified trading firm that engages in proprietary trading across various asset classes. The SEC claims that Cumberland operating as an unregistered dealer in over $2 billion worth of cryptocurrency assets, which is a violation of federal securities laws. 

According to the SEC’s complaint, Cumberland has engaged in regular trading of cryptoassets offered and sold as securities since at least March 2018. The firm is accused of conducting these trades without complying with the registration requirements outlined in Section 15(a) of the Securities Exchange Act of 1934.

The SEC alleges that Cumberland, which publicly identifies itself as a major liquidity provider in the crypto market, bought and sold these digital assets through its trading platform, Marea, and over-the-counter (OTC) methods. The SEC further alleges that the cryptoassets traded were classified as investment contracts, meaning they were treated as securities under U.S. law and that — despite this classification — Cumberland did not register as a dealer, as required by law.

Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, highlighted that the registration of securities dealers is essential to ensuring investor protection. Tenreiro pointed out that despite frequent claims by the crypto industry that digital assets function like commodities, Cumberland and its trading counterparties handled the assets as securities, reaping profits without the oversight provided by registration. 

The SEC’s complaint, filed in the U.S. District Court for the Northern District of Illinois, seeks permanent injunctive relief against Cumberland, along with the disgorgement of profits, prejudgment interest, and civil penalties.

Responding to this announcement on the social media platform X, Cumberland said that it is not going to make any changes to its business operations or the set of cryptoassets for which it provides liquidity as a result of this action.