Federal Court Denies CFTC and Gemini Effort to Reverse $5M Settlement Agreement
A federal judge has denied a collaborative motion from the CFTC and Gemini to reverse a $5 million settlement agreement, notwithstanding the agency's evolving approach to cryptocurrency enforcement.
A federal judge in the United States has turned down a collaborative motion filed by cryptocurrency exchange Gemini and the Commodity Futures Trading Commission (CFTC) seeking to reverse a $5 million settlement agreement, even though the regulatory body determined the case would not meet current enforcement criteria.
US District Judge Alvin Hellerstein issued his decision on Thursday, determining that modifications to CFTC enforcement priorities and accusations of improper conduct by the agency's enforcement division were insufficient grounds for reversing the settlement reached in January 2025.
The CFTC and Gemini filed a joint motion with the court on May 27 requesting the settlement be overturned following an internal agency examination that uncovered alleged improper conduct by the regulator's enforcement division, including dependence on a dubious whistleblower, inappropriate regulatory coercion and attempts to suppress the disclosure of evidentiary materials.
The court's decision preserves a permanent injunction that prevents Gemini from making false or misleading representations to the CFTC. The settlement agreement additionally prohibits Gemini from publicly disputing its findings, though the regulatory agency stated in June it would no longer seek to enforce such limitations.
The $5 million penalty has already been paid by Gemini, and the CFTC informed Cointelegraph previously that the funds would not be returned even in the event the settlement were reversed.
Judge cites Gemini's decision to settle before trial
The litigation focused on the operational methods Gemini employed for its Bitcoin auction. Based on the consent order from January 2025, the exchange neglected to reveal that certain customers were trading using borrowed capital, that self-trading had taken place despite protective measures and that particular traders were granted special fee arrangements.
Additionally, Gemini provided trading volume data without revealing that portions of the activity included these practices.
Hellerstein noted that Gemini had already been cognizant of deficiencies in the CFTC's case at the time it chose to settle, fewer than three weeks prior to trial. While the exchange subsequently acquired additional internal CFTC documentation, the judge determined that the newly obtained information was insufficient to reverse a settlement that Gemini had entered into voluntarily.
The judge further dismissed the contention that President Donald Trump's digital asset executive order and the regulator's revised enforcement strategy warranted relief, stating they represented policy changes rather than a substantial change in law.
Timothy Massad, former CFTC Chair, had previously characterized the regulator's attempt to reverse a settled case as "extraordinarily unusual," stating to Cointelegraph that the public "deserves a better explanation."