While this initially came out yesterday the news of Gemini being sued was not really covered due to the huge workforce layoff that the company had announced. Honestly, that was a huge deal and could have been announced to cover up that the U.S. Commodity Futures Trading Commission or CFTC was suing Gemini for omitting facts and misleading regulators in 2017. While the CFTC might not be a well-known regulator it is the regulator for the derivatives markets. This market includes futures and certain kinds of options.

Back in 2017 the Winklevoss Twins' through their Gemini exchange became a vital player in the first launch of Bitcoin futures. Launched from Chicago-based Cboe Global Markets the role Gemini played was critical. The contracts were settled based on Gemini's auction price for Bitcoin. Just two years later in 2019 Cboe discontinued offering Bitcoin futures as they needed to reassess how it would approach the cryptocurrency space. At the time since it was in the middle of Crypto Winter people chalked it up to waning demand but if these allegations are true well that might not be the whole story. 

The complaint states that from July to December of 2017, when this product was going through all of the regulatory hurdles, Gemini made false and misleading statements about how they would prevent manipulation in prices. Really rounding off the accusation as well as the statement that "Gemini personnel knew or reasonably should have known that such statements were false or misleading" thus covering the oft used excuse of well I did not exactly say that.

The Block's Frank Chaparro's deep dive into the complaint exposed some incredibly damning information. According to the CFTC Gemini lied about giving market makers rebates on its Gemini Bitcoin Auction trading platform. This means that the price was not necessarily the actual price as the person could have received a rebate from Gemini to make the transaction go through!

Since this was the price contracts were settled on Gemini customers were able to create millions of dollars in fee rebates in just weeks by trading large volumes between themselves! Something this means that those who had access to a large amount of BTC could make a ton of cash while smaller fish in the game were absolutely killed. Due to this type of action and others, Gemini made false and misleading statements by not revealing this type of trading to regulators. In essence, a lot of the same Bitcoin was just cycled through and made to appear that "new" Bitcoin was entering the market. Their trading volumes and liquidity numbers were really by default not what the company had told regulators it was deceiving them. With this being the first of its kind type product the government had to rely more on individuals in the company than they typically would hence the reason why it is only now being addressed.  

What the regulators seek in their lawsuit is honestly worse than any fine that they could dish out to Gemini and the Winklevoss Twins'. In the Manhattan federal court case, the agency is seeking not only trading but registration bans. If it needed a cherry on top, yes, they also want fines as well. If bans are implemented it would be a crazy thing to see and throw the whole exchange into upheaval. The government has a wide array of various bans and what is targeted but needless to say it could get really ugly really quick. 

Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_

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