Gemini Settles With CFTC Over Alleged Misleading Statements During 2017 Bitcoin Futures Contract Launch

The settlement comes during a challenging period for Gemini. The company has faced increased scrutiny from regulators over its business practices and financial stability.

U.S. cryptocurrency exchange Gemini has settled a civil lawsuit filed by the Commodity Futures Trading Commission (CFTC) over allegations of providing false or misleading statements during its efforts to launch the first U.S.-licensed Bitcoin futures contract in 2017, according to a recent report by Bloomberg.

The settlement, filed on Jan. 6 in the U.S. District Court for the Southern District of New York, allows Gemini to avoid a civil trial scheduled for Jan. 21, 2025. However, the exchange neither admitted nor denied wrongdoing as part of the agreement.

The CFTC's complaint, which was initially filed in June 2022, accused Gemini of inaccurately portraying safeguards against price manipulation and misleading the commission about the contract's susceptibility to market interference. The regulator also alleged that Gemini failed to disclose certain fee arrangements and key details about an employee's termination, which raised concerns about internal transparency.

According to court documents, further details emerged regarding Gemini's practices, revealing that the company had entered into undisclosed fee arrangements that favored certain market participants, such as market makers, to artificially inflate trading activity. These arrangements were not disclosed publicly, raising transparency issues.

Moreover, internal communications showed that executives at Gemini downplayed the risks of manipulation and violated rules on conflicts of interest, while the lawsuit also noted that Gemini omitted crucial details about an employee's termination, who had been involved in discussions with the CFTC. These omissions contributed to the regulator's concerns.

The settlement comes during a challenging period for Gemini, which has faced increased scrutiny from regulators over its business practices and financial stability. In 2023, the exchange became entangled in legal conflicts with creditors of its Gemini Earn program, which had partnered with bankrupt cryptocurrency lender Genesis Global Capital. The failure of Genesis prevented Gemini's customers from withdrawing about $900 million, triggering a public battle between the Winklevoss twins and Genesis parent company Digital Currency Group (DCG).

As the largest cryptocurrency exchange in the United States, the settlement also highlights the Commodity Futures Trading Commission's (CFTC) efforts to regulate the crypto industry. The CFTC has the authority to oversee digital asset markets and can impose fines and other penalties for violations of U.S. commodities laws.

The settlement with Gemini is part of a broader trend of increased regulatory attention towards the crypto space in 2024. The CFTC has levied substantial fines on several major crypto firms, including Kraken ($30 million) and FTX ($100 million), for allegedly offering illegal off-exchange digital asset trading.

ThePORTER reached out to Gemini for comment on the settlement but did not receive an immediate response by press time.