On Thursday, the Gemini crypto exchange found itself in legal trouble once more, as a lawsuit was filed against it by the Commodity Futures and Trading Commission (CFTC). The regulatory authority has claimed that the crypto exchange provided them with misinformation. The allegations pertain to the historic and much-awaited launch of Bitcoin (BTC) futures by the Gemini crypto exchange back in 2017.
Looking into the Lawsuit
The federal regulator filed a civil claim against the Gemini crypto exchange that comprises of about 28 pages and alleged that the exchange had misled it blatantly. The Winklevoss twins own and operate the exchange platform and their company, Gemini Trust Company LLC was accused of giving misleading answers to the regulatory authority.
Back in 2017, the exchange had been questioned by the CFTC about the price of their BTC futures contract and if it was possible to manipulate price through it. According to the regulator, the exchange did not provide them with accurate information when it came to their meetings and made several omissions as well as misleading statements.
In its lawsuit, the CFTC also alleged that the misinformation that the exchange had provided was against the Commodity Exchange Act. The regulatory body also claimed that the said information was material for conducting a proper evaluation of the BTC futures contract that the exchange had proposed. The company gave statements that were an important part of the assessment and had impacted the exchange’s users, investors, as well as the market. Likewise, those who had participated in the BTC Auction by the exchange had also been affected.
According to the CFTC, the proposal put forward by the Geminin exchange could be manipulated easily and would help the platform in duping investors.
The CFTC’s Allegations
The CFTC went on to say that Gemini had presented itself as an exchange platform, but this was a misrepresentation, as it fit the definition of a ‘full reserve’. This was because all the transactions conducted on the exchange would be funded beforehand. The authority asserted that due to this nature, the exchange claimed that the contracts would not be vulnerable to price manipulation. Furthermore, this would boost trading costs and also make it inconvenient and costly to engage in any malpractices.
It was further alleged by the CFTC that the Gemini exchange had tried to boost its trading volumes by cutting down the trading costs as an incentive. Other incentives it offered involved loaning Bitcoin to thousands of traders in order to encourage them to participate in the launch of Bitcoin Futures in 2017. The Commission also said that the exchange had even given advances to some of the customers and had enabled them to use their accounts for trading instantly, even when they didn’t have the funds.
The regulatory body also said that Gemini’s claim of having a prevention mechanism in place for ensuring traders don’t trade with themselves was a lie. But, it should be noted that there is no mention in the lawsuit of the collaboration of the exchange with the CBOE.