CFTC Sues Gemini Over Bitcoin Futures Misinformation

Crypto exchange Gemini Trust Co. has been sued by the Commodity Futures Trading Commission (CFTC) over a Bitcoin Futures Case from 2017. 

Gemini Sued Over Misinformation

The crypto exchange, founded by the Winklevoss twins, has been accused of launching the first US-regulated Bitcoin futures contract by misleading the CFTC, which has filed a lawsuit in federal court in Manhattan, seeking to impose fines on the exchange, along with trading and registration bans. 

CFTC Acting Director of Enforcement Gretchen Lowe commented on the matter, 

“Making false or misleading statements to the CFTC in connection with a futures product certification undermines the CFTC’s work to ensure the financial integrity of all transactions subject to the CEA, protect market participants, deter and prevent price manipulation, and promote responsible innovation and fair competition. This enforcement action sends a strong message that the Commission will act to safeguard the integrity of the market oversight process.”

Charges Against Gemini

The regulator claimed that in 2017, Gemini had made false and misleading statements about the preventative measures it was taking to ward off Bitcoin price manipulation for their product – Bitcoin-based derivatives. Allegedly, the crypto exchange misled the CFTC about its measures to prevent people from trading against themselves. The regulator has claimed that the exchange team fed the misinformation to them on the eve of Cboe Global Markets launching the first BTC futures contract on an exchange overseen by the CFTC in 2017. This event marks the start of BTC’s exponential growth in the industry. 

An excerpt from the 28-page long civil suit filed by the CFTC reads,  

“[The proposed Bitcoin futures contract] was particularly significant because it was to be among the first digital asset futures contracts listed on a designated contract market, at a time of fervent interest by market participants in obtaining exposure to Bitcoin through the derivatives markets,” said the regulator.”

“Pre-Funded” Or Not? 

The report also contained details of how Gemini misrepresented facts to the commission staff during the Relevant Period, in both oral and written communications, claiming to be a “full reserve” exchange that required all transactions to be fully “pre-funded.” The accusations levied against Gemini state that the exchange had advanced some funds to certain customers, allowing them to trade before having fully funded their accounts. Allegedly, the crypto exchange was trying to boost trading volumes by lowering the capital cost for participants. 

However, Gemini has denied all allegations, releasing a statement on the matter, 

“Gemini has been a pioneer and proponent of thoughtful regulation since day one. We have an eight-year track record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court.”

The CFTC has been cracking down on all perceived wrongdoings in the crypto industry, with Tether, Bitfinex, and PolyMarket already bearing the brunt of their heavy fines. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.