Gemini accuses CFTC of using false whistleblower testimony in the 2022 lawsuit, alleging a 7-year “lawfare” campaign against the crypto exchange.
According to Gemini Trust, the introduction of “dubious” allegations against the crypto exchange in 2022 resulted from the Commodity Futures Trading Commission’s litigators’ “selfish desire” to advance their careers.
They accused the CFTC’s Division of Enforcement attorneys of relying on a questionable whistleblower report to sue the company in a letter sent to CFTC Inspector General Christopher Skinner on Friday.
“DOE Staff selectively and unfairly weaponized the Commodity Exchange Act to bring dubious false statements charges against them,” the exchange’s attorneys claimed.
Gemini alleged that DOE personnel were motivated by a selfish desire to advance their careers by misusing their offices to achieve a high-profile “win” against Gemini Trust and that the claims against it were the result of a whistleblower submission that was riddled with lies by a discredited former employee.
In June 2022, the CFTC filed a lawsuit against Gemini, alleging that the company had made false or misleading statements in 2017 while the agency assessed the potential for manipulating a Bitcoin futures contract that the exchange was planning to introduce.
They settled the CFTC’s claims in January by paying a $5 million fine without acknowledging or denying the agency’s findings. In its letter on Friday, the exchange stated that it “had no other choice” at the time.
The lawsuit was based on a “false whistleblower report”
The exchange’s former operating chief, Benjamin Small, allegedly conducted a “malicious campaign” against the exchange after his termination, according to Gemini, who alleged that the DOE’s investigation and litigation were predicated on a false whistleblower report filed in 2017.
The exchange claimed that Hashtech LLC, its executives Alex Ruthizer and Jonathan David, and Cardano Singapore PTE Ltd., its executive Satoshi Kobayashi, were involved in a “multi-million dollar rebate fraud” in mid-2017, for which Small was allegedly dismissed for attempting to conceal losses.
Gemini claimed that the companies “coordinated their trading to abuse special fee structures and improperly earn substantial rebates.” They also claimed that Small, the then-operating chief, had authorized them. This approval subsequently resulted in his dismissal by Gemini co-founders Cameron and Tyler Winklevoss.
Small informed the CFTC that the Bitcoin contract could be manipulated
Gemini alleged that Small’s termination prompted him to inform the CFTC of the matter, alleging that the company failed to disclose information in its statements to the agency regarding the potential for manipulation of its Bitcoin futures contract.
The exchange stated that CFTC litigators “immediately and unquestioningly” embraced Small’s claims and used them to initiate an investigation into Gemini in 2018.
Gemini asserted that its Bitcoin futures contract “functioned in a consistent manner for 19 months” and that “no allegations of contract manipulation were made during this period.”
CFTC requires a “long-term commitment” to reform the Department of Energy
Gemini stated that Caroline Pham, the acting chair of the CFTC, is “taking proactive steps to fix” the Division of Enforcement after she outlined what she termed “dubious enforcement actions” in a May 2024 statement.
Gemini stated that this transformation will necessitate serious introspection and long-term commitment from the agency to guarantee that this bad-faith behavior never occurs again.
The exchange informed the CFTC that it was prepared to assist in any way it deemed beneficial.
