The Commodity Futures Trading Commission today announced the U.S. District Court for the Southern District of New York entered a consent order against Gemini Trust Company LLC, a New York trust company.
The order includes a permanent injunction, and finds Gemini violated the CEA and made materially false or misleading statements or omissions to the Commission. The order requires Gemini Trust to pay a $5 million civil monetary penalty.
“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 Director of Enforcement Ian McGinley. “This result sends a strong message that the Commission will act to safeguard the integrity of the market oversight process, regardless of whether the market involves complex digital asset derivative products or more traditional commodity futures.”
Case Background
The order stems from the CFTC’s July 2, 2022, complaint against Gemini Trust. [See CFTC Press Release No. 8540-22].
The order finds that from around July - December 2017, Gemini Trust made statements to the Commission in connection with the potential self-certification by a designated contract market of a bitcoin futures contract, which was to be settled by reference to the spot bitcoin price on the relevant day as determined by an auction held on Gemini Trust. During the self-certification process, Gemini Trust, through its representatives, made certain statements (or failed to disclose certain facts) that Gemini Trust reasonably should have known were false or misleading, which were material to the Commission’s evaluation of whether the bitcoin futures contract would be susceptible to manipulation. These included statements regarding its purported “prefunding requirement” and the cost of capital to trade in the Gemini Trust Auction, including that it was a “full reserve” exchange that required all transactions to be fully “prefunded,” statements concerning self-trading prevention, statements concerning fee rebates, and statements concerning trade volume and liquidity.
The Division of Enforcement staff responsible for this case are Christopher Giglio, Shantel Ogbuagu, Peter Janowski, David W. Oakland, Katherine Rasor, Andrew Rodgers, Diana Wang, K. Brent Tomer, Alejandra de Urioste, Lenel Hickson Jr., and Manal M. Sultan, and additional assistance was provided by Alyson Cohen and Jack Murphy.