Gemini Accuses CFTC of False Charges Based on Whistleblower Lie

Gemini Trust has accused the Commodity Futures Trading Commission (CFTC) of bringing dubious charges against the crypto exchange in 2022, driven by the agency's Division of Enforcement lawyers' desire to advance their careers. In a letter to CFTC Inspector General Christopher Skinner, Gemini alleged that the agency's lawyers relied on a false whistleblower report to sue the company. The exchange claimed that the Division of Enforcement staff selectively and unfairly weaponized the Commodity Exchange Act to bring false statements charges against Gemini.

Gemini asserted that the claims against it originated from a lie-riddled whistleblower submission by a discredited former employee. The CFTC sued Gemini in June 2022, alleging that the exchange made false or misleading statements in 2017 regarding the susceptibility of a Bitcoin futures contract to manipulation. Gemini paid a $5 million fine to settle the CFTC’s claims in January without admitting or denying the agency’s findings, stating that it had no other choice at the time.

The exchange claimed that the Division of Enforcement’s investigation and lawsuit relied on a false whistleblower report filed in 2017 by Benjamin Small, the exchange’s former operating chief. Small was fired for allegedly trying to hide losses stemming from a multi-million dollar rebate fraud involving Hashtech LLC, its executives Alex Ruthizer and Jonathan David, Cardano Singapore PTE Ltd., and its executive Satoshi Kobayashi. Gemini alleged that these companies coordinated their trading to abuse special fee structures and improperly earn substantial rebates, which Small approved as the then-operating chief, leading to his dismissal by Gemini co-founders Cameron and Tyler Winklevoss.

Gemini claimed that Small’s firing led him to blow the whistle to the CFTC, alleging 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 immediately and unquestioningly embraced Small’s claims and used them to start an investigation into Gemini in 2018. Gemini asserted that its Bitcoin futures contract operated orderly for 19 months, with no allegations of contract manipulation during that period.

Gemini expressed support for CFTC acting chair Caroline Pham’s efforts to fix the Division of Enforcement, noting that she outlined dubious enforcement actions in a May 2024 statement. The exchange stated that this transformation will require serious introspection and long-term commitment from the agency to ensure that bad-faith behavior never happens again. Gemini offered to help the CFTC in whatever capacity they deemed helpful.