Gemini pays $5M to settle CFTC lawsuit over Bitcoin futures

Gemini, the crypto exchange founded by the Winklevoss twins, has cut a $5 million check to settle a lawsuit with the Commodity Futures Trading Commission (CFTC).

The case had accused them of misleading the regulator while trying to launch the first U.S.-regulated Bitcoin futures contract. This settlement avoids a trial that was set for January 21, just one day after Donald Trump’s second inauguration as president.

Gemini neither admitted nor denied any wrongdoing, but they’re out $5 million, and the CFTC is satisfied. The lawsuit goes back to 2022 when the CFTC alleged that Gemini had made “false and misleading statements” about its ability to prevent manipulation in Bitcoin prices.

These prices were supposed to be the cornerstone of derivatives based on the crypto. It’s just one of many enforcement actions brought under the Biden administration as regulators tried to tighten their grip on the crypto industry.

Gemini’s legal disaster

Gemini’s troubles didn’t start with the CFTC lawsuit. In 2017 and 2018, the Manhattan U.S. Attorney’s Office launched a criminal investigation tied to the company’s efforts to roll out Bitcoin futures.

Prosecutors subpoenaed laptops from two former Gemini executives—Benjamin Small and Shane Molidor—looking for evidence of wrongdoing. Gemini handed over the laptops, which were company-issued, and the investigation dragged on for years.

Eventually, prosecutors returned the laptops, and no criminal charges were ever filed. Benjamin Small, Gemini’s former chief operating officer, wasn’t just a part of the probe—he became a whistleblower after leaving the company. He claimed Gemini fired him for flagging improper transactions, but his attempt to sue the company didn’t go well. An arbitrator ruled against him, calling his actions “grossly negligent” and blaming him for financial losses at Gemini.

Meanwhile, Shane Molidor, who worked in business development, moved on to become the CEO of AscendEX, previously BitMax. Although the criminal case is closed, the laptops are still causing headaches. The CFTC wants access to their contents for its civil case.

One of the laptops is reportedly encrypted, and Gemini’s legal team has been hunting for the password. According to court filings, the laptops contain drafts and edits of key documents presented to the CFTC, which could reveal how Gemini pitched its Bitcoin futures contract.

Market manipulation allegations: The CFTC’s smoking gun

Regulators claim that Gemini loaned money to market makers to juice trading activity on its exchange. This move allegedly weakened protections against price manipulation. Gemini employees didn’t seem too concerned about self-trading, which is when traders buy and sell with themselves to distort prices.

In one internal message cited in the lawsuit, an employee reportedly said, “They’re grownups; they can figure it out.” Self-trading wasn’t rampant on the platform, according to Gemini, especially after the company implemented measures to prevent it in May 2017.

But the CFTC wasn’t buying it. The regulator argued that Gemini’s loose controls allowed traders to engage in behavior that could warp Bitcoin prices, undermining the credibility of the futures market.

The lawsuit also focused on how Gemini presented its processes to the CFTC. According to the regulator, the company’s statements during its application for the Bitcoin futures contract were crafted to mislead.

The laptops at the center of the case allegedly contain communications showing how Gemini staff discussed and edited their pitches to regulators. The CFTC believes this evidence could prove the company intentionally obscured key details.

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