Explosive: Gemini Accuses CFTC of ‘Trophy-Hunting Lawfare’ in 2022 Lawsuit

In a dramatic escalation of tensions, crypto exchange Gemini is leveling serious accusations against the Commodity Futures Trading Commission (CFTC). The company claims the agency’s 2022 lawsuit against it was not only based on flawed information but was driven by CFTC enforcers seeking career advancement through ‘trophy-hunting lawfare’. This move shines a spotlight on the ongoing friction between crypto platforms and US regulators, particularly concerning crypto regulation.

Did a False Whistleblower Report Fuel the CFTC Lawsuit Against Gemini?

Gemini recently sent a letter to CFTC Inspector General Christopher Skinner, alleging that the agency’s Division of Enforcement (DOE) lawyers relied on a dubious whistleblower report to initiate the lawsuit. According to Gemini, this report came from a discredited former employee, Benjamin Small.

The exchange contends that DOE staff “selectively and unfairly weaponized” the Commodity Exchange Act to bring “dubious false statements charges” against Gemini. The core accusation is that these litigators were motivated by a “selfish desire to advance their careers” by securing a high-profile win against the exchange.

Key points from Gemini’s claims:

• The CFTC lawsuit originated from a “lie-riddled whistleblower submission.”
• The former employee, Benjamin Small, was fired for allegedly trying to hide losses from a “multi-million dollar rebate fraud.”
• Small allegedly filed the whistleblower report after his dismissal as part of a “malicious campaign” against Gemini.
• Gemini claims CFTC litigators “immediately and unquestioningly” embraced Small’s claims in 2018.

The 2022 CFTC Lawsuit and Gemini’s Settlement

The CFTC sued Gemini in June 2022. The agency alleged that Gemini made false or misleading statements in 2017 during the evaluation of a proposed Bitcoin futures contract. The CFTC was assessing whether the contract was susceptible to manipulation.

In January, Gemini settled the CFTC’s claims by paying a $5 million fine. Notably, Gemini did not admit or deny the agency’s findings as part of the settlement. In its recent letter, Gemini stated it felt it “had no other choice” but to settle at the time.

Gemini maintains that its Bitcoin futures contract “operated orderly for 19 months” and that there was “no allegation of contract manipulation” during that period.

Why Does Gemini Call it ‘Trophy-Hunting Lawfare’?

Gemini’s strong language, particularly the term ‘trophy-hunting lawfare,’ highlights its belief that the CFTC’s enforcement actions were not purely about regulatory compliance but about securing high-profile cases to boost the careers of individual staff members. The exchange suggests that the reliance on a seemingly unreliable whistleblower report, despite alleged evidence contradicting his claims, points to a predetermined agenda rather than a neutral investigation.

This accusation is part of a broader narrative among some in the crypto industry who feel that regulators are sometimes overly aggressive or lack a deep understanding of the technology and markets they oversee.

Looking Ahead: Calls for CFTC Overhaul

Gemini’s letter also acknowledged CFTC acting chair Caroline Pham’s recent statements about the need to address “dubious enforcement actions.” Gemini expressed hope that Pham is taking steps to improve the Division of Enforcement.

The exchange stressed that transforming the DOE will require “serious introspection and long-term commitment from the agency as a whole” to prevent similar situations from occurring again. Gemini offered its willingness to assist the CFTC in any way deemed helpful for this process.

The allegations made by Gemini are significant. They challenge the integrity of a past regulatory action and raise questions about the motivations behind certain enforcement pursuits in the crypto space. As the landscape of crypto regulation continues to evolve, transparency and fairness in regulatory actions remain critical points of discussion for the industry.

In summary, Gemini’s accusation that the CFTC lawsuit was based on a false whistleblower report and driven by self-serving motives paints a contentious picture of regulatory enforcement. While the $5 million settlement is concluded, Gemini’s recent letter reignites the debate surrounding the methods and objectives of regulatory bodies overseeing the crypto market.