|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency News Articles
Tether's Favorite Market Maker Cumberland Global Targeted by SEC, Bringing Stablecoin Issuer Closer to Regulatory Reckoning
Oct 15, 2024 at 07:00 pm
On October 10, the U.S. Securities and Exchange Commission (SEC) announced the filing of a civil complaint against Cumberland DRW LLC
America’s securities regulator has targeted Tether’s favorite market maker Cumberland Global in a move that could bring the world’s leading stablecoin issuer closer to a regulatory reckoning.
On October 10, the U.S. Securities and Exchange Commission (SEC) announced the filing of a civil complaint against Cumberland DRW LLC in the U.S. District Court in the Northern District of Illinois. The SEC accuses Cumberland, an offshoot of the Chicago-based DRW Trading Group, of “operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities” since March 2018.
The complaint accuses Cumberland of earning “millions of dollars in ill-gotten gains” by buying and selling the aforementioned unregistered securities without registering as a securities dealer with the SEC. In doing so, Cumberland deprived investors and markets “of the protections of the federal securities laws’ registration provisions.”
The SEC says Cumberland has allowed “more than 1,500 high-net-worth individuals and entities” to act as counterparties on Cumberland’s Marea online trading platform since the platform’s launch in early 2019. These counterparties have included “prominent participants in the crypto asset space, such as funds managed by crypto asset investment firms and certain now defunct crypto asset hedge funds.”
Cumberland also engages in “discretionary risk-taking” by establishing long or short positions on various tokens, as well as “proprietary strategy trading” on third-party exchanges (including Binance, Bittrex, Coinbase (NASDAQ:COIN), Kraken and Poloniex). These and other operations generated over $400 million in revenue and $27 million in profits for Cumberland since 2019.
The SEC cited a “non-exhaustive list” of the tokens traded by Cumberland that the regulator considers unregistered securities: Polygon Technology (formerly MATIC, now POL); Solana (SOL); Cosmos (ATOM); Algorand (ALGO); and Filecoin (FIL). The SEC alleges that each of these assets “was offered and sold as an investment contract since inception.” These tokens represent “at least $2 billion” in Cumberland trading volume cited in the complaint.
Statements made by the issuers and promoters of these tokens “would have led objective investors to reasonably view” offers to buy or sell the tokens as “offers to purchase and sell investment contracts.” The SEC goes on to offer specific details on how these tokens trigger the various planks of the Howey test for identifying securities that require registration with the SEC.
The SEC is seeking to permanently bar Cumberland from further violations of the Exchange Act, as well as force Cumberland to disgorge (with interest) all illicit trading profits obtained via the illegal conduct alleged in the complaint.
Cumberland says ‘bring it’
In response, Cumberland issued a defiant statement calling itself “the latest target of the SEC’s enforcement-first approach to stifling innovation and preventing legitimate companies from engaging in digital assets.”
Cumberland claimed to have “engaged in five years of good-faith discussions with the SEC” regarding whether its transactions involved unregistered securities. But the complaint allegedly marks “the first time the SEC has outlined the specific transactions at issue.”
Cumberland “acquired a registered broker-dealer in 🧃,” but claims the SEC informed it that “we could only use our broker-dealer to trade BTC or ETH,” which Cumberland insists are commodities and thus not under the SEC’s jurisdiction.
Cumberland stated that it won’t be “making any changes to our business operations or the assets in which we provide liquidity” as a result of the SEC’s complaint. Cumberland claims to be “confident in our strong compliance framework and disciplined adherence to all known rules and regulations.”
Cumberland recalled its parent company’s successful legal fight with the Commodity Futures Trading Commission (CFTC) back when it was led by current SEC chair Gary Gensler. Having previously prevailed over “overzealous regulators wielding their power in ways that harm rather than benefit the market,” Cumberland stands “ready to defend ourselves again.”
Tether ties
In 2021, Cumberland was revealed as the largest recipient of USDT (Tether) issued at the time, ahead of even the now defunct Alameda Research, the corrupt offshoot of Sam Bankman-Fried’s equally corrupt FTX digital asset exchange.
Given its USDT whale status, Cumberland would be in a prime position to confirm or deny Tether’s oft-repeated historical claim that it only issued USDT after receiving an equal amount of U.S. dollars. Tether has since introduced some wiggle room into this benchmark, admitting that it sometimes accepts digital assets like BTC in lieu of dollars, or even loaning USDT to people Tether appears to believe are good for it.
Just FYI, the SEC’s complaint against Cumberland came hot on the heels of the Department of Justice (DOJ) criminal charges against a handful of minor market makers for manipulating the prices of several memecoins (as
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
-
- Zilliqa Announces Halving Mechanism for Mining Rewards as Part of Transition to Proof-of-Stake (PoS) Consensus with Zilliqa 2.0 Upgrade
- Oct 15, 2024 at 10:25 pm
- Zilliqa, a prominent blockchain platform known for its innovative sharding technology, has announced a significant change in its mining reward structure.
-
- Smart Wallets: The Future of Cryptocurrency Accessibility
- Oct 15, 2024 at 10:25 pm
- The evolution of Ethereum and smart contracts has finally enabled crypto users to get the kind of wallet they want. With their “account abstraction” features, smart crypto wallets gain essential capabilities such as the ability to recover a lost password and batch transactions to save on gas fees.