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SEC sues Cumberland for $2B unregistered crypto dealing

SEC sues Cumberland for $2B unregistered crypto dealing

GrafaGrafa2024/10/10 21:30
By:Liezl Gambe

The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Cumberland DRW, accusing the company of operating as an unregistered dealer of cryptocurrency assets. 

According to the SEC, Cumberland has allegedly conducted over $2 billion worth of unregistered crypto transactions since 2018. 

The lawsuit, filed on October 10, claims Cumberland violated federal registration requirements by engaging in proprietary trading and trading on third-party crypto exchanges without proper registration. 

The SEC identified five tokens handled by Cumberland—Polygon (CRYPTO:MATIC), Solana (CRYPTO:SOL), Cosmos (CRYPTO:ATOM), Algorand (CRYPTO:ALGO), and Filecoin (CRYPTO:FIL)—as securities, asserting that the company’s actions violated Section 15(a) of the Securities Exchange Act of 1934. 

According to the complaint, "Cumberland acted as a securities dealer but failed to register as a securities dealer with the Commission, in violation Section 15(a) of the Securities Exchange Act of 1934 (the ‘Exchange Act’)." 

The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. 

Cumberland responded, stating it registered as a dealer-broker in 2019 but later discovered that the registration only applied to Bitcoin and Ether. 

"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 said in a statement posted on X. 

Cumberland emphasized it will not alter its business operations following the lawsuit. 

"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," the company stated. 

Cumberland joins other firms like Crypto.com in challenging the SEC, as Crypto.com recently sued the agency seeking clarification on its securities broker-dealer status.

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