CFTC Files for Partial Summary Judgment, Says Gemini Misled Regulators on Bitcoin Futures Contract
On Tuesday, May 7, 2024, the U.S. Commodity Futures Trading Commission filed a motion for partial summary judgment against cryptocurrency exchange Gemini Trust Co. LLC. The CFTC’s lawsuit alleges that Gemini misled regulators in seeking approval for a bitcoin futures contract.
According to the CFTC motion, Gemini made “scores of materially false or misleading statements and omissions” to the agency during the approval process for the proposed bitcoin futures contract. This included misrepresenting aspects of Gemini’s exchange and auction platform that were critical for the CFTC’s analysis of whether the contract could be susceptible to manipulation.
Specifically, the CFTC claims Gemini said it had robust procedures to prevent self-trading when gaps actually existed. Gemini also allegedly failed to disclose that it sometimes provided loans and advances to traders, which could reduce their costs. The exchange also purportedly obscured the extent of rebates and discounts it offered certain market makers.
When providing volume and liquidity numbers to the CFTC, Gemini allegedly did not account for the loans and rebates, inflating the figures to include “non-bona fide trading activity.” This included instances of self-trading and wash trading, according to the CFTC.
The motion argues the case is ready for summary judgment, as the parties do not dispute the statements made or information withheld. This comes after Gemini filed its own summary judgment motion, claiming many statements were from listing exchange Cboe Futures Exchange, not named in the suit.
However, the CFTC argues Gemini made the statements “directly and through” Cboe. The agency says Gemini was “deeply involved” in submissions, edited, approved language, and had authority over its own exchange information provided to regulators.
The CFTC also states that even if statements came through an intermediary, false statements can still violate the law. “Defendant cannot get a free pass for certain false or misleading statements that relate to its own exchange,” said the CFTC motion.
If granted, the CFTC’s partial summary judgment motion would find Gemini liable for violating the Commodity Exchange Act without needing to go to trial over the disputed claims.
Please contact BlockTribune for access to a copy of this filing.
