Judge rejects CFTC and Gemini bid to undo $5 million settlement
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U.S. District Judge Alvin Hellerstein denied the joint motion to vacate the consent order on Oct. 15.
The $5 million civil penalty and the permanent injunction from January 2025 remain in place.
The court said the policy shift was not a change in law and Gemini chose to settle on its own.
A federal judge has refused a joint request from the U.S. Commodity Futures Trading Commission (CFTC) and crypto exchange Gemini to wipe out the settlement that ended their legal fight. U.S. District Judge Alvin Hellerstein of the Southern District of New York on Oct. 15 denied the two parties' motion to vacate the consent order entered in January 2025. Gemini's $5 million civil penalty and the permanent injunction barring it from making false or misleading statements to the CFTC stay in place.
What Gemini left out during a bitcoin futures review
The case dates back to 2017. Gemini made representations to CFTC staff during the agency's review of a proposed bitcoin futures contract that was to settle against an auction price on Gemini's own exchange. The CFTC sued on June 2, 2022, alleging those statements were false or misleading. According to the ruling, the consent order found misrepresentations and omissions across four subjects.
Gemini said its auction was "fully (pre-)funded" without disclosing that customers could and did trade using loans from a Gemini affiliate or advances from a Gemini employee. It said self-trading, in which the same party is on both sides of a trade, was technologically prevented, even though no such safeguard existed before around May 2017 and instances continued after it was put in place. It described its market-maker rebate program as uniform and publicly disclosed, without revealing bespoke fee arrangements that two customers exploited for fraudulent or collusive trading, and it submitted historical volume data that partly reflected those loans, self-trading and fraudulent trades. Gemini also did not disclose that it had suspended and later fired the two employees responsible for those fee arrangements after concluding they were untrustworthy.
Gemini litigated for about three years before agreeing to settle on Dec. 24, 2024, fewer than three weeks before trial, and the court entered the consent order on Jan. 6, 2025. Gemini neither admitted nor denied the allegations but agreed not to publicly deny the findings. It has already paid the penalty.
Regulator and exchange on the same side
CFTC and Gemini (joint motion, May 28)
Under the CFTC's enforcement policies since Executive Order 14178 of Jan. 23, 2025, the agency would not have brought the case. A post-settlement review of internal materials found the Division of Enforcement relied on a questionable whistleblower, applied regulatory pressure and invoked deliberative process privilege to keep evidence from coming out. Continuing to enforce the remaining provisions is therefore inequitable.
Judge Hellerstein (ruling, Oct. 15)
The facts the parties cite are not post-judgment developments; they go to the merits of the case. The executive order, the Deputy Attorney General's memo and the CFTC's enforcement approach reflect a change in enforcement priorities, not a change in law. Claims of enforcement misconduct had to be raised within one year of the judgment. Gemini, represented by counsel, fought the case for more than three years and chose to settle.
"In settling, Gemini made a 'free, calculated, [and] deliberate choice.'"
U.S. District Judge Alvin Hellerstein, Southern District of New York (ruling, citing precedent)
A final judgment is not undone just because both sides agree
Hellerstein wrote that the parties' agreement that relief is warranted does not by itself justify reopening a final judgment. The ruling cited a 1994 case that rejected modifying a consent decree where a new administration disagreed with its predecessor's view of the merits and found the decree's terms no longer convenient. Gemini's receipt of additional materials after the fact may have caused it to regret settling, the judge wrote, but it did not create a change in circumstances that made continued enforcement inequitable.
The judge also pointed to Gemini's own conduct. According to the ruling, Gemini knew as early as August 2017 that it was "the victim of a sophisticated fraud scheme enabled by its own Chief Operating Officer" and a subordinate, and knew the COO had threatened to interfere with the CFTC's review, yet its highest officials still misrepresented material facts. He also found that the executive order and a Deputy Attorney General memo titled "Ending Regulation by Prosecution" did not amount to a "significant change ... in law" that would justify modifying the settlement.
Hellerstein added that the CFTC retains discretion over its enforcement priorities and may take its current policies into account in deciding whether to seek enforcement of the consent order. Decrypt reported that the CFTC has said it will no longer enforce the provision barring Gemini from denying the settlement's findings.
According to Decrypt, the CFTC under Chairman Mike Selig recently approved Gemini's expansion into prediction markets and perpetual futures. With the ruling, the consent order's findings and injunction over the 2017 conduct remain in effect.
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