CFTC Sues Gemini Over 2017 BTC Futures Contract Evaluation

  • One of the main points of the complaint is that Gemini provided misleading information on how susceptible to manipulation the BTC futures contract could be.
  • The CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, injunctions relating to registration and trading, and an injunction against further violations of the Commodity Exchange Act.
Founders of Gemini Tyler Winklevoss (L) and Cameron Winklevoss

Founders of Gemini Tyler Winklevoss (L) and Cameron Winklevoss speak onstage during TechCrunch Disrupt NY 2015 on day 3 at The Manhattan Center on May 6, 2015 in New York City. Noam Galai/Getty Images for TechCrunch

The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Gemini Trust Co., accusing the company of providing false or misleading statements in 2017, the regulator said in a press release on 2 June.

According to the announcement, the suit was filed in the Southern District Court of New York, and accuses Gemini of misleading the CFTC during the company’s effort to launch a Bitcoin (BTC) futures contract back in 2017. At the time, the federal regulator was evaluating the potential self-certification of the BTC futures contract — which was meant to utilize price data from Gemini’s exchange — when the company “made false or misleading statements of material facts”. The CFTC’s acting director of enforcement, Gretchen Lowe, said in a statement:

“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.”

The 28 page civil suit has accused Gemini of providing false information between July and December 2017, which was “relevant to, among other things, assessing the size of, liquidity on, and number of market participants” that used the Gemini Exchange and Bitcoin Auction. The company later made false statements, in both “oral and written communications”, regarding whether the BTC futures contract would be susceptible to manipulation. The agency has alleged that Gemini was trying to reduce the capital cost for market participants to boost trading volumes, including loaning thousands of BTC to market participants.

If the court decides to side with the regulator, the Winklevoss-owned Gemini could receive penalties such as disgorgement of ill-gotten gains, civil monetary penalties, injunctions relating to registration and trading, and an injunction against further violations of the Commodity Exchange Act.

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