Gemini Sued by CFTC Over 2017 Bitcoin Futures

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  • The CFTC is suing Gemini over its 2017 Bitcoin futures product
  • The regulator claims that Gemini misled it over market the likelihood of market manipulation
  • It also claims that some Bitcoin futures users engaged in wash trading and other illegal activities

On the day that it announced a 10% staff cut, Gemini had some more bad news as the Commodity Futures Trading Commission (CFTC) announced that it was suing the exchange alleging false statements in relation to a Bitcoin futures product in the early days of crypto derivatives. The lawsuit, which arrived on an already traumatic day for the Gemini owners the Winklevoss twins, with the CFTC alleging that the exchange omitted “material facts” and provided untrue information between July and December 2017 at a time when the regulator was in the process of assessing the new product.

Gemini Launched Bitcoin Futures in December 2017

Gemini announced the first ever Bitcoin futures contract on December 8, 2017, in tandem with Cboe under the ticker XBT, with the CFTC stating that Gemini provided loans to market makers on its platforms in order to “facilitate trading” and in the auction process that set the settlement price for the Bitcoin futures contracts.

The core allegation centres on regular auctions that took place on the exchange which determined the payout buyers and sellers of the futures contracts would receive, with the CFTC alleging that Gemini should have known that statements it made regarding whether a proposed Bitcoin futures contract “would be readily susceptible to manipulation” were false and misleading.

CFTC Alleges “Collusive” Wash Trading

The CFTC also alleged that the way the Bitcoin futures contracts were structured meant that they “could be and at times were exploited by customers to engage in collusive, non-bona-fide, wash or self-trading.”

The CFTC is seeking civil monetary penalties and other relief including trading and registration bans, which of course would be the worst case scenario for the exchange.