Gemini Sued for False or Misleading Statements over Bitcoin Futures Contract

Fazzaco learned that the Commodity Futures Trading Commission (CFTC) has charged against Gemini Trust Company, LLC (Gemini) ,headquartered in New York, for making false or misleading statements of material facts or omitting to state material facts to the CFTC regarding the self-certification of a bitcoin futures product. 

According to CFTC's complaint, Gemini, directly and through others, made false or misleading statements of material facts, or omitted to state material facts, to the regulator during an evaluation of the potential self-certification of a bitcoin futures contract by a designated contract market (DCM) from approximately July 2017 to around December 2017.

The complaint also alleged that Gemini, directly and through the DCM, provided information to the CFTC concerning Gemini's trading platform and the Gemini Bitcoin Auction, but some information the company conveyed or omitted are false or misleading about whether the proposed Bitcoin Futures Contract would be readily susceptible to manipulation. 

In detail, Gemini declared that all its transactions were "pre-funded," making a bitcoin futures product less susceptible to manipulation. "It increased traders' cost of capital, therefore made improper trading conduct more expensive for malicious actors," the company added.

Besides, the firm didn' t mentioned the personal "unsecured" loans amounting to "thousands of bitcoin" obtained by its certain customers that contributed to the trading volume on its exchange as well as the advances of credit in fiat currency and crypto assets it had offered customers.

CFTC stated in the press release that the proposed Bitcoin Futures Contract was significant because it was to be among the first digital asset futures contracts listed on a designated contract market. 

Acting Director of Enforcement Gretchen Lowe commented the case: "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.”

As a result, 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 (CEA), as charged.

Before the lawsuit, Gemini has announced plans to reduce approximately 10% of its workforce because of the current crypto market collapse as well as macroeconomic and geopolitical turmoil.