Gemini Trust claims it was a “selfish desire” by the Commodity Futures Trading Commission’s litigators to advance their careers that allowed “dubious” charges to be brought against the crypto exchange in 2022.
In a letter on Friday to CFTC Inspector General Christopher Skinner, Gemini alleged the agency’s Division of Enforcement lawyers relied on a dodgy whistleblower report to sue the company.
“DOE Staff selectively and unfairly weaponized the Commodity Exchange Act [….] to bring dubious false statements charges against Gemini,” lawyers for the exchange claimed.
Gemini claimed DOE staffers “were driven by a selfish desire to advance their careers by misusing their offices to obtain a high-profile ‘win’ against Gemini Trust” and that “the claims against it originated with a lie-riddled whistleblower submission by a discredited former employee.”
The CFTC sued Gemini in June 2022, alleging it made false or misleading statements in 2017 as the agency evaluated whether a Bitcoin futures contract the exchange wanted to launch was susceptible to manipulation.
Gemini paid a $5 million fine to settle the CFTC’s claims in January without admitting or denying the agency’s findings, with the exchange claiming in its letter on Friday that “it had no other choice” at the time.
“False whistleblower report” used for lawsuit
Gemini claimed that the DOE’s investigation and lawsuit relied on a false whistleblower report filed in 2017 by the exchange’s former operating chief, Benjamin Small, who allegedly undertook a “malicious campaign” against the exchange after it fired him.
Small was fired for allegedly trying to hide losses stemming from a “multi-million dollar rebate fraud” in mid-2017, which the exchange claimed involved Hashtech LLC, its executives Alex Ruthizer and Jonathan David, Cardano Singapore PTE Ltd. and its executive Satoshi Kobayashi.
Gemini alleged the companies “coordinated their trading in order to abuse special fee structures and improperly earn substantial rebates,” and said that Small approved them as the then-operating chief, which later led to his dismissal by Gemini co-founders Cameron and Tyler Winklevoss.
Small told CFTC Bitcoin contract could be manipulated
Gemini claimed Small’s firing led him to blow the whistle to the CFTC, claiming that Gemini did not disclose information in its statements to the agency about whether its Bitcoin futures contract was susceptible to manipulation.
The exchange said CFTC litigators then “immediately and unquestioningly” embraced Small’s claims and used them to start an investigation into Gemini in 2018.
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Gemini claimed its Bitcoin futures contract “operated orderly for 19 months,” and during that time, there was “no allegation of contract manipulation.”
CFTC needs “long-term commitment” to overhaul DOE
Gemini said that CFTC acting chair Caroline Pham “is taking proactive steps to fix” the Division of Enforcement after she outlined in a May 2024 statement what she called “dubious enforcement actions.”
“This transformation will require serious introspection and long-term commitment from the agency as a whole to ensure that this bad-faith behavior never happens again,” Gemini said.
The exchange told the CFTC it was willing to help it “in whatever capacity they would deem helpful.”
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