The Commodity Futures Trading Commission joined Gemini on Wednesday in asking a judge to vacate a $5 million penalty against the cryptocurrency exchange.

A CFTC investigation found the regulator’s Division of Enforcement “resorted to inappropriate tactics in order to bring this case” and later “extract a settlement from Gemini,” according to court documents filed Wednesday.

The enforcement division based its complaint largely on a whistle-blower account that was not credible, the CFTC said. The division also concealed evidence from a CFTC commissioner ahead of a vote on whether to grant authority to pursue a case against Gemini, the agency said.

Further, Gemini was defrauded by its former ‌chief ⁠operating officer and two customers who received improper rebates, the CFTC said. Yet, rather than investigate the fraud, the CFTC’s case centered on allegations that Gemini made misleading statements about the integrity of its bitcoin futures trading business, the agency said in the court filing.

Regulators then exerted inappropriate influence by telling Gemini that ​it would not be approved ​for a new prediction ⁠market platform while the enforcement action was pending, the CFTC said in Wednesday’s court filing.

The CFTC “concluded the complaint should not have been filed – and would not have been under current enforcement standards,” the regulator said Wednesday in a press release.

“These findings not only call into question the CFTC’s enforcement process in this instance but also demonstrate the necessity of the federal government’s revised enforcement approach and standards, including in the digital asset space,” the agency said.

It is unclear whether the $5 million penalty Gemini paid in January 2025 would be ​refunded to the company. Gemini did not immediately respond to a request for comment Wednesday from Reuters.

Gemini founders Cameron and Tyler Winklevoss, who each donated $1 million to President Donald Trump’s 2024 election campaign, raised the CFTC case last summer to a nominee to lead the agency.

Brian Quintenz, Trump’s one-time pick to serve as CFTC chair, shared screenshots last September, appearing to imply the Winklevosses lobbied the White House to stall his nomination because he was less than direct when asked if he would reconsider the case.

Tyler Winklevoss sought Quintenz’s thoughts about a letter Gemini’s attorneys had sent to the agency’s inspector general, according to the screenshots. The letter, written last June by Gemini attorney John Baughman, characterized CFTC attorneys as “driven by a selfish desire to advance their careers by misusing their offices to obtain a high-profile ‘win’ against Gemini.”

“I’d like to understand your thoughts on this and how you plan to align with President Trump and the Administration’s mandate to end the lawfare and make amends for it,” Winklevoss texted Quintenz in a screenshot shared by the latter on X.

Quintenz replied that the issue should be handled by a confirmed CFTC chair, adding that he would look into it if he got the job.

Winklevoss, in a separate message to Quintenz, called the case “7 years of lawfare trophy hunting.” (The seven years span from the alleged false and misleading statements made in 2017 to the penalty announcement in January 2025.)

“I believe these texts make it clear what they were after from me, and what I refused to promise,” Quintenz wrote in September on X.

The White House withdrew Quintenz’s nomination later that month and, within weeks, nominated now-CFTC Chair Mike Selig.

Incidentally, although CFTC representatives allegedly once told Gemini its prediction market product would not be approved while the enforcement action was pending, Gemini’s prediction market product got the green light in December.

Gemini announced a pivot to the predictions market in February, in tandem with a 25% cut to its workforce and a wind-down of operations in the U.K., the European Union and Australia.

The CFTC isn’t the only regulator to walk back actions against Gemini this year. The Securities and Exchange Commission in January dropped a 2023 lawsuit it filed over the collapse of Gemini Earn, an investment product in which the crypto exchange’s customers loaned their assets to former partner firm Genesis in exchange for interest.