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.
Gemini founders Tyler Winklevoss (L) and Cameron Winklevoss (R) onstage during TechCrunch Disrupt, New York, May 6, 2015. 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.
- An investigation from the New York Attorney General’s office has allegedly found that Gemini was aware of Genesis’ weak financial position, but still lied to investors.
- The lawsuit is looking to ban DCG, Genesis, and Gemini from the New York financial industry, seek restitutions for investments, and the return of “ill-gotten gains”.
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- During an interview with FT, CEO Brian Armstrong said that before the lawsuit a SEC staff member had said that all crypto except BTC was security, and should be delisted.
- When asked how he came to that conclusion, the SEC staff member reportedly said “we’re not going to explain it to you, you need to delist every asset other that Bitcoin”.
- The U.S. SEC, CFTC, and FTC have all filed separate lawsuits against bankrupt crypto lender Celsius and its former CEO Alex Mashinsky, charging them with multiple counts of fraud.
- Mashinsky was also arrested in New York on Thursday, and later charged by the Department of Justice with securities fraud, commodities fraud, and wire fraud.