The United States Securities and Exchange Commission (SEC) has initiated a lawsuit against Chicago-based crypto maker Cumberland, alleging the company operated as an unregistered securities dealer in handling over $2 billion worth of cryptocurrencies.
The charges against Cumberland are the latest move by the SEC to crack down on the fast-growing crypto industry. The regulator once again reiterated its longstanding characterization of cryptocurrencies such as Solana as securities.
SEC Charges Cumberland For Unregistered Crypto Dealer Activities
The Securities and Exchange Commission alleged in a Thursday lawsuit that Cumberland “bought and sold” cryptocurrencies that were sold as unregistered securities. Per the SEC’s complaint, Cumberland has operated as an unregistered dealer since at least March 2018.
The regulator claims that Cumberland traded “crypto assets that are offered and sold as investment contracts on third-party crypto asset exchanges.”
The SEC’s suit names five assets that the top Wall Street financial cop considers to be securities, including Polygon’s POL (formerly MATIC), Solana’s (SOL), Cosmos’ (ATOM), Algorand’s (ALGO), and Filecoin’s (FIL). The agency indicates, however, that it is a “non-exhaustive” list of such tokens.
“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,” postulated Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit (CACU), in a statement.
According to Tenreiro, Cumberland raked in handsome profits for dealing in these assets without protecting investors pursuant to federal securities laws. The SEC noted that Cumberland mostly conducts its trading through an online trading platform called Marea, which debuted in early 2019.
The Commission is seeking disgorgement, a permanent injunction, and civil penalties.
The Latest Target Of SEC’s Enforcement-First Crypto Approach
In a statement posted on X (aka Twitter), Cumberland revealed that it had been in good-faith discussions with the Securities and Exchange Commission for at least five years and had handed over thousands of pages of materials to the regulator.
The crypto trading firm further noted that it had become “the latest target of the SEC’s enforcement-first approach” but insisted that it wouldn’t be “making any changes to our business operations or the assets in which we provide liquidity” due to the suit.
“We are confident in our strong compliance framework and disciplined adherence to all know rules and regulations — even as they have been a moving target (it wasn’t long ago ETH was claimed to be a security.”
“We’re ready to defend ourselves again,” Cumberland added, referencing a 2018 suit from the U.S. Commodities and Futures Trading Commission (CFTC) against it, which the company prevailed.
Notably, Cumberland is not the only SEC crypto target to respond audaciously. After being slapped with a Wells notice warning it of imminent SEC enforcement action, Crypto.com sued the Commission on Oct. 8, requesting a judge to declare, among other things, that the company is not a securities broker-dealer required to be registered under the Exchange Act.
In addition, Ripple Labs has escalated its legal dispute with the SEC, filing a cross-appeal in its ongoing courtroom drama with the agency.
