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The United States Securities and Exchange Commission (SEC) filed suit against Cumberland DRW on Oct. 10, advancing a single charge of operating as an unregistered dealer. Cumberland has allegedly sold more than $2 billion in crypto assets since 2018 in violation of federal registration requirements.
The SEC&nbsp;<a data-ct-non-breakable="null" href="https://www.sec.gov/newsroom/press-releases/2024-169" rel="null" target="null" text="null" title="null">claims</a>&nbsp;that Cumberland acted as an unregistered dealer in its proprietary trading (trading on its own accounts) and when trading on third-party crypto asset exchanges. The agency is seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest and civil penalties.
<h2 id="cumberland-says-it-tried-to-register">Cumberland says it tried to register</h2>
The SEC claimed that five of the tokens Cumberland handles are securities. Specifically, they are Polygon (<a data-ct-non-breakable="null" href="https://cointelegraph.com/polygon-price-index" rel="null" target="null" text="null" title="null">MATIC</a>), Solana (<a data-ct-non-breakable="null" href="https://cointelegraph.com/solana-price-index" rel="null" target="null" text="null" title="null">SOL</a>), Cosmos (<a data-ct-non-breakable="null" href="https://cointelegraph.com/cosmos-price-index" rel="null" target="null" text="null" title="null">ATOM</a>), Algorand (<a data-ct-non-breakable="null" href="https://cointelegraph.com/algorand-algo-price-index" rel="null" target="null" text="null" title="null">ALGO</a>), and Filecoin (<a data-ct-non-breakable="null" href="https://cointelegraph.com/filecoin-fil-price-index" rel="null" target="null" text="null" title="null">FIL</a>). The agency&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sec-labels-61-cryptocurrencies-securities-after-binance-suit" rel="null" target="null" text="null" title="https://cointelegraph.com/news/sec-labels-61-cryptocurrencies-securities-after-binance-suit">identified </a><a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sec-labels-61-cryptocurrencies-securities-after-binance-suit" rel="null" target="null" text="null" title="null">all</a> of them&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sec-expands-binance-lawsuit-axs-fil-atom-securities" rel="null" target="null" text="null" title="null">as securities in</a>&nbsp;the past. According to the complaint:
<blockquote>
 “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’).”&nbsp;
</blockquote>
Cumberland countered in a statement posted on X that it registered as a dealer-broker in 2019, but found out afterward that the registration only applied to Bitcoin (<a data-ct-non-breakable="null" href="https://cointelegraph.com/bitcoin-price" rel="" target="_self" text="null" title="https://cointelegraph.com/bitcoin-price">BTC</a>) and Ether (<a data-ct-non-breakable="null" href="https://cointelegraph.com/ethereum-price" rel="" target="_self" text="null" title="https://cointelegraph.com/ethereum-price">ETH</a>). The company said of the other tokens:
<blockquote>
 “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.”
</blockquote>
Related:&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sec-redefinition-dealer-would-expand-oversight-crypto-defi" rel="null" target="null" text="null" title="null">SEC redefinition of ‘dealer’ would expand its oversight of crypto, DeFi</a>
<figure>
 <img alt="SEC sues Cumberland DRW for unregistered crypto dealer activities" src="https://s3.cointelegraph.com/uploads/2024-10/0192780a-69e1-7b4b-a99d-15cc4478ebcc" title="">
 <figcaption style="text-align: center;">
 SEC suit against Cumberland DRW. Source: Pacer
 </figcaption>
</figure>
<h3 id="responses-to-the-sec">Responses to the SEC</h3>
Noting that it is only “the latest target” of the SEC’s approach to digital assets, Cumberland sounded an audacious note:
<blockquote>
 “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.”
</blockquote>
<figure>
 <img alt="SEC sues Cumberland DRW for unregistered crypto dealer activities" src="https://s3.cointelegraph.com/uploads/2024-10/01927806-cf37-7b80-807b-16cfac594344" title="">
 <figcaption style="text-align: center;">
 Source: <a data-ct-non-breakable="null" href="https://x.com/CumberlandSays/status/1844424478660624806" rel="nofollow noopener" target="_blank" text="null" title="https://x.com/CumberlandSays/status/1844424478660624806">Cumberland</a>
 </figcaption>
</figure>
Cumberland is not the only SEC crypto target to respond defiantly. After receiving a Wells notice warning it of upcoming SEC legal action,&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/crypto-com-sues-sec-protect-future-crypto-us" rel="null" target="null" text="null" title="null">Crypto.com sued the agency</a>&nbsp;on Oct. 8 seeking declaratory and injunctive relief. It asked a Texas district court to declare, among other things, that Crypto.com is not a securities broker-dealer required to be registered under the Exchange Act.&nbsp;
Magazine:&nbsp;<a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/godzilla-vs-kong-can-sec-prevail-against-crypto-legal-firepower/" rel="null" target="null" text="null" title="null">Godzilla vs. Kong: SEC faces fierce battle against crypto’s legal firepower</a>
&nbsp;

SEC sues Cumberland DRW for unregistered crypto dealer activities

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