Who is Cumberland, the SEC's Latest Big Crypto Target?

The U.S. Securities Exchange Commission has pursued a spate of lawsuits against prominent crypto exchanges and blockchain technology companies such as Kraken, Binance, and Ripple Labs in recent years. 

But, the agency’s latest target, Cumberland, isn't exactly a household name. 

The Chicago-based market maker—charged on Thursday with acting as an unregistered dealer of securities among other securities-laws violations—is a major player on the crypto scene, and the case against it could have ripple effects for a wide range of crypto firms and traders. The company has denied any wrongdoing.

Here's what you should know about Cumberland DRW.

What is Cumberland DRW? 

Cumberland DRW is one of the digital asset industry's largest market makers and liquidity providers. It’s a subsidiary of DRW Trading Group, a well-known Chicago-based firm founded in 1992 that’s also a market maker in traditional finance while specializing in the trading of various financial instruments.

Cumberland is the firm's crypto-focused entity, founded in 2014. As one of the larger market makers and liquidity providers, it aims to facilitate institutional investments in cryptocurrency. 

As a market maker, Cumberland buys and sells cryptocurrencies such as Bitcoin, Ether, Solana, Polygon, and Cosmos on major digital asset trading platforms. Its activities provide a continuous market for a variety of digital assets, enable cryptocurrencies to be priced more efficiently, and contribute to more stable token prices across various markets. 

As a liquidity provider, the firm provides support for listed options and futures, bilateral crypto options, and spot cryptocurrency activities, among other trades. This allows traders to execute high-volume orders without causing drastic fluctuations in tokens’ market prices. 

Cumberland also engages in venture capital investing and proprietary trading. 

Which crypto companies does Cumberland work with? 

Cumberland is a large client of Tether, the issuer of USDT, the world's most traded stablecoin. 

Since early August, a wallet believed to belong to the firm has injected several hundred million dollars worth of USDT in CEXs such as Kraken and Binance, according to blockchain analytics platform Spot on Chain. 

Why is Cumberland so important to the crypto ecosystem? 

Cumberland's market-making is crucial to creating stable token prices in crypto markets‌, exerting continuous buying and selling pressure. Meanwhile, its liquidity services make possible massive buy and sell digital asset orders from deep-pocketed investors. 

Without firms such as Cumberland, there would be far less activity in crypto markets‌, and executing buy and sell orders would be far more difficult and less accessible.  

What's up with Cumberland’s crypto wallets, and why are people watching them?

Some digital asset analysts and traders closely monitor Cumberland's wallets, which hold more than $80 million in crypto, according to Arkham Intelligence.

By following the inflows and outflows of those digital wallets, analysts and traders can better predict tokens’ price movements, in addition to making broader assessments of the state of the digital asset markets.

Edited by Sebastian Sinclair