SEC Agrees to Drop Crypto Case Against Cumberland DRW

SEC Agrees to Drop Enforcement Suit Against Cumberland DRW, Firm Says

The U.S. Securities and Exchange Commission (SEC) has agreed to drop its enforcement case against Cumberland DRW, the crypto trading arm of Chicago-based trading firm DRW, according to a Tuesday announcement from the company.

The SEC sued Cumberland DRW last October, accusing the firm of acting as an unregistered securities dealer and alleging it sold more than $2 billion in unregistered securities, naming tokens like Polygon (POL), Solana (SOL), Cosmos (ATOM), Algorand (ALGO) and Filecoin (FIL) as a “non-exhaustive” list of tokens the agency considered to be securities.

DOGE Comes for the SEC

Compliance and audit professionals are hearing today that the DOGE mind virus has now reached the Securities and Exchange Commission, with significant cuts in personnel and resources looming. Let’s take a look at all this to understand what’s really going on at the SEC and how those changes are likely to affect corporate compliance and audit teams.

First and most notably, on Monday news reports surfaced that the SEC has made $50,000 buyout offers to all eligible employees (those who have been with the agency since before January 2024) if they quit or resign by April. Apparently this is a prelude to future reduction-in-force job cuts the SEC might make after that.

Second, word also came over the weekend that the Government Services Administration plans to close SEC offices in Los Angeles and Philadelphia, and wants to close the SEC regional office in Chicago as soon as the GSA can figure out how and when it can wriggle out of the Chicago lease without incurring significant financial penalties. News also broke at the end of February that the SEC plans to lay off all its regional office directors, too.

So what does all this mean? It means the SEC will be working at diminished capacity, where scofflaws can enjoy a free ride while good corporate citizens grit their teeth and endure a dysfunctional relationship with your regulator.

Meanwhile, here’s what these DOGE cutbacks do not do.

SEC Crypto Task Force to Host Roundtable on Security Status

The Securities and Exchange Commission today announced that its Crypto Task Force will host a series of roundtables to discuss key areas of interest in the regulation of crypto assets. The “Spring Sprint Toward Crypto Clarity” series will begin on March 21 with its inaugural roundtable, “How We Got Here and How We Get Out – Defining Security Status.”

DOJ Forsakes Defending the ALJ Process Against Article II Challenges

An inability or self-imposed refusal to bring enforcement actions before an ALJ likely will diminish a regulator’s likelihood of success in many litigations. Further, litigating in federal district court also can require more government resources. Although the legal landscape is still evolving and it is difficult to make reliable predictions at this point, this change in position should alter the respective bargaining power of the regulator and the regulated entity during many underlying examinations in which the regulator finds perceived violations. Certain enforcement actions that previously would have been brought either will be streamlined or simply not be brought at all.

Finally, it is difficult to see how this situation will be resolved quickly. The entire premise of a successful Article II challenge is that an ALJ is protected from removal under Section 7521, and individual ALJs may protest or litigate the issue of how easily they can be fired. Individual agency commissioners may have conflicting perspectives on how to best structure their in-house courts. Or, the current administration may pursue other avenues.