The U.S. Commodity Futures Trading Commission (CFTC) filed a complaint against Gemini Trust Company in the District Court for the Southern District of New York.
The regulator alleges that from around July to December 2017, the company misled the regulator in an attempt to gain approval for its bitcoin futures product.
The Gemini product was launched in late 2017 with Cboe Global Markets. The specifics of the product was that the bitcoin contract had to be concluded the day before the expiration date based on an auction conducted by Gemini, in order to ensure a close correlation between futures and the BTC spot price.
According to the CFTC complaint, the crypto exchange misled the regulator about the principle by which the auction works. The exchange argued that all bets must be pre-funded by traders, and that increasing traders’ costs would make their futures product less susceptible to manipulation. However, the company subsequently allowed some individual participants to start trading before their account was funded.
The watchdog alleges that Gemini offered incentives in the form of discounts and fee reallocations to boost trading volume. The company also provided trading incentives to some of its individual clients without publicly disclosing them.
As part of the charge, the CFTC is seeking monetary fines and possibly a ban on trading and listing on the exchange, if the court deems such a measure necessary.
Earlier, CFTC Commissioner Caroline Pham said that investing in digital assets is like buying lottery tickets.
