FxNews—The U.S. Securities and Exchange Commission (SEC) has initiated legal proceedings against Cumberland DRW, labeling it an unregistered securities dealer. The accusation centers on the firm’s activities in the cryptocurrency market, particularly its buying and selling digital assets purported to be unregistered securities.
Promotional Activities Under Scrutiny
According to the SEC, Cumberland has been utilizing its research findings and periodic updates via email to push investments in various cryptocurrencies. Among the digital currencies mentioned are Polygon’s {{POL}} (previously known as MATIC), Solana‘s (SOL), Cosmos’ (ATOM), Algorand’s (ALGO), and Filecoin’s (FIL), which the SEC describes as examples of assets treated as securities.
SEC’s Basis for the Lawsuit
The SEC’s complaint outlines that Cumberland’s promotional methods, alongside statements from crypto asset creators and trading platforms associated with Cumberland, could lead reasonable investors to treat the trade of these digital assets as security transactions under federal laws.
These transactions are expected to yield profits, further aligning them with the characteristics of securities.
Lack of Proper Registration
Despite engaging in these activities, Cumberland has not obtained the necessary registration as a securities dealer, a violation highlighted by the SEC in its ongoing efforts to regulate the crypto market.
The SEC detailed specific instances, such as a promotional email from Cumberland about ATOM, highlighting its potential for a rally based on its year-to-date performance and underlying fundamentals. Such communications are part of the SEC’s evidence suggesting that Cumberland treated these cryptocurrencies as investment opportunities.
Cumberland’s Response to Allegations
In response to the lawsuit, Cumberland posted a statement on social media, asserting its intention to continue business operations without adjustments.
The firm stands by its compliance practices, emphasizing adaptability in navigating the evolving regulatory landscape, previously presented by Ethereum‘s (ETH) shifting classification within security laws.
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Legal Consequences Sought by SEC
The SEC seeks a permanent injunction against Cumberland and the repayment of all profits derived from these allegedly unlawful activities. This action aims to enforce strict adherence to securities law in the rapidly changing crypto market.