SEC Targets DRW in Crypto Charges

The US Securities & Exchange Commission (SEC) has upped the ante in its efforts to become the lead regulator of crypto markets in the US by bringing charges against crypto market maker Cumberland DRW for failing to register with the authority.

Cumberland DRW has been operating as a market maker “since at least 2018” according to the SEC, which observes that the firm has publicly been calling itself “one of the world’s leading liquidity providers” in crypto assets.

The SEC says that Cumberland DRW “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” and presumably believes that being a principal market maker is the equivalent of offering securities to investors – something that has not officially been resolved in the US. The SEC is in a seemingly eternal battle with several firms in the crypto industry, all of whom are pushing back against the Commission’s authority (or alleged lack of), and Cumberland seems no different. In a post on social media, the firm wrote, “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 are confident in our strong compliance framework and disciplined adherence to all known rules and regulations – even as they have been a moving target (it wasn’t long ago ETH was claimed to be a security).”

For the SEC, Jorge Tenreiro, acting chief of its crypto assets and cyber unit, says in a statement, “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. 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.”