Gemini Trust Company LLC has agreed to pay a $5 million civil penalty following allegations from the Commodity Futures Trading Commission (CFTC).
The U.S. District Court for the Southern District of New York approved the settlement, which resolves claims that Gemini provided false or misleading information to the CFTC during its 2017 application process to self-certify a bitcoin futures contract.
Inaccuracies about “prefunding requirement” and trading costs
The CFTC’s investigation revealed that Gemini misrepresented several critical aspects of its operations. Among the claims were inaccuracies about its purported “prefunding requirement” and the costs associated with trading on its platform.
Additional issues included statements concerning self-trading prevention, fee rebates, trade volume, and liquidity. The CFTC argued that these details were material to its evaluation of whether the bitcoin futures contract could be susceptible to manipulation.
“Making false or misleading statements to the CFTC in connection with a derivatives product certification undermines the CFTC’s efforts to ensure all futures products trading on CFTC-regulated markets comply with the CEA and CFTC regulations and, among other things, are not readily susceptible to manipulation,” said Ian McGinley, Director of Enforcement.
The conduct took place between July and December 2017
The allegations focused on Gemini’s conduct between July and December 2017. During this time, the firm made several statements or omissions that, according to the CFTC, Gemini “reasonably should have known” were misleading.
These inaccuracies were tied to the auction held on Gemini’s platform, which served as a reference for the settlement price of the proposed bitcoin futures contract.
The settlement includes a permanent injunction preventing Gemini from further violations of the Commodity Exchange Act (CEA). This penalty serves as a warning to other entities in the digital asset space about the importance of accurate disclosures during regulatory reviews.
