Crypto market maker Cumberland parent backs trade manipulation monitor

A leading crypto market maker has funded surveillance firm Eventus Systems, which detects wash trading and other manipulation.

Chicago-based trading giant DRW — parent of crypto market maker Cumberland — joined a recent investment round in trading surveillance company Eventus Systems.

Fellow Chicago trading firm Jump also participated in the $30 million round, led by New York fund Centana Growth Partners.

A set of venture capital firms associated with DRW and Jump were also involved.

Eventus Systems says it’s a “global leader in multi-asset class trade surveillance, market risk and transaction monitoring solutions.” 

Effectively, the company sells software that hopes to detect market manipulation such as wash trading — which is rife across the crypto ecosystem.

Eventus Systems flags if company employees and customers make illicit trades or otherwise skirt market regulations.

The firm’s gear already monitors stocks, bonds, and derivatives markets (options, futures), but this latest funding round will help further propel it into cryptocurrencies, noted Bloomberg.

Eventus Systems already counts clients including crypto exchanges Coinbase, Gemini, and BitMEX, as well as Swiss investment lord Credit Suisse.

DRW’s Cumberland issues a shitload of Tether

DRW’s investment comes in the wake of a Protos article which revealed DRW subsidiary Cumberland Global is one of the top two issuers of Tether, the largest and most liquid stablecoin.

This means DRW-Cumberland is a leading crypto market maker.

Indeed, Eventus System’s move into crypto indicates digital asset market makers want to stamp out behavior easily construed as manipulative or deceptive.

It also suggests that rumored lax rules on crypto exchanges and over-the-counter trading desks — which allow for so-called “running the stops” — could be more prevalent than previously thought. 

Running the stops involves a crypto market maker pushing an asset’s price low enough to trigger large swathes of stop-loss orders.

The asset bounces back once the sudden tanking fills the stop-losses, often to the detriment of retail buyers.

In crypto, the infamous “inverse Bart Simpson” pattern is associated with big fish running the stops.

Crypto market makers ready to self-regulate?

Thanks to the Dodd-Frank Act (which came in the wake of the 2008 financial crisis), this type of market manipulation is no longer simply punishable by fines or slaps on wrists — but could be met with lengthy prison sentences. 

DRW famously defeated the US Commodities and Futures Commission in a market manipulation case that went on for over five years.

Meanwhile, the Securities and Exchange Commission (SEC) and its chair Gary Gensler have put the multi-trillion crypto markets at the forefront of their mission to protect investors and stop financial malfeasance.

The finance watchdog recently hinted warnings and lawsuits were in the works, particularly related to market manipulation. 

Gary Gensler is playing hardball with crypto exchanges and over-the-counter trading desks.

Read more: [SEC chief reckons crypto exchanges need a regulator for market manipulation]

SEC regulators served a Wells Notice to top US crypto exchange Coinbase earlier this month over its proposed interest-bearing accounts.

So, if the list of participants in Eventus Systems’ funding round is anything to go by, trading firms, hedge funds, and crypto market makers could be taking self-regulation more seriously.

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