The United States Securities and Exchange Commission (SEC) filed a lawsuit against Cumberland DRW on October 10, accusing the company of operating as an unregistered dealer. According to the SEC, Cumberland has sold over $2 billion in crypto assets since 2018 without meeting federal registration rules.
Allegations of Unregistered Trading
The SEC claims that Cumberland acted as an unregistered dealer through its proprietary trading activities (trading on its own accounts) and when trading on third-party crypto exchanges. The agency is seeking multiple penalties, including:
– Permanent injunctive relief
– Disgorgement of ill-gotten gains
– Prejudgment interest
– Civil penalties
The SEC highlighted five specific tokens that Cumberland handles as securities. These include Polygon, Solana, Cosmos, Algorand, and Filecoin. The agency has previously labelled these assets as securities. In its complaint, the SEC stated:
“Cumberland acted as a securities dealer but failed to register as a securities dealer with the Commission, in violation of Section 15(a) of the Securities Exchange Act of 1934.”
Cumberland Responds to SEC Claims
Cumberland responded to the lawsuit by posting a statement on X (formerly Twitter), arguing that it registered as a dealer-broker in 2019. However, the registration applied only to Bitcoin and Ether. The company emphasised:
“We have engaged in five years of good-faith discussions with the SEC on this point […] Today’s complaint is the first time the SEC has outlined the specific transactions at issue.”
Cumberland noted that it is just the “latest target” of the SEC’s approach to digital assets. Despite the lawsuit, the company remains defiant:
“We are not making any changes to our business operations or the assets in which we provide liquidity as a result of this action by the SEC […] We’re ready to defend ourselves again.”
Crypto.com Fights Back Against SEC
Cumberland is not the only crypto company facing the SEC’s scrutiny. On October 8, Crypto.com filed a lawsuit against the SEC after receiving a Wells notice, which indicated the agency’s intention to take legal action. Crypto.com is seeking a court ruling that it is not a securities broker-dealer and therefore not required to register under the Exchange Act.
