CFTC sues Winklevoss’ Gemini exchange over bitcoin futures contract

abdelaziz Fathi

The US derivatives regulator has filed a lawsuit against Gemini, the cryptocurrency exchange founded by the Winklevoss twins, for providing false information.

The Commodity Futures Trading Commission (CFTC) said the operatives of Gemini exchange made false statements concerning a bitcoin futures contract the firm was pursuing alongside Cboe in 2017.

In a race by major exchanges to offer bitcoin derivatives products, the complaint alleges that Gemini made “false or misleading statements of material facts, or omitted to state material facts” during the CFTC’s evaluation of its proposed futures contract.

Among other things, Gemini’s replies to a series of CFTC’s inquiries distorted the facts relevant to understanding whether the proposed BTC derivative would be susceptible to manipulation. As alleged in the complaint, Gemini personnel knew or reasonably should have known that such statements were false or misleading.

The eventual payout on the bitcoin futures contract depends on the auction price at Gemini exchange of the Winklevoss brothers. As such, anyone placing big bets on the futures market must be confident that the auction price cannot be manipulated. At the time, many criticised the CFTC’s decision, arguing that insufficient attention has been paid to the risks involved.

“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,” said Acting Director of Enforcement Gretchen Lowe. “This enforcement action sends a strong message that the Commission will act to safeguard the integrity of the market oversight process.”

“We have an eight year track-record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court,” Gemini said in a statement.

Gemini handled nearly $80 million of cryptocurrency trades during the past 24 ‎hours, languishing around the 9th global rank, according to data provided by Coinmarketcap.

In November, the cryptocurrency platform raised $400 million at a $7.1 billion valuation. As for Gemini’s creators, the twins are early investors in Bitcoin and have been highly bullish on its future value. They proposed an exchange-traded fund (ETF) that would track Bitcoin prices, allowing investors to gain exposure to bitcoin on a fully regulated venue. However, the US Securities and Exchange Commission (SEC) denied their application several times.

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