Gemini, the New York City bitcoin exchange founded by Cameron and Tyler Winklevoss, experienced a large market buy order on November 13th that drove up the price of bitcoin on the exchange to as a high as $2,200, or around $1,800 above the current market price.
The exchange, after consideration decide to roll back the large trade.
Cameron Winklevoss announced:
Upon making our determination, we immediately alerted all counterparties involved and have been working diligently to ensure the most equitable resolution possible. We have also been working on building and implementing a strategy to prevent and help mitigate similar situations in the future. It has been no small undertaking, and we greatly appreciate your patience, apologize for any inconvenience and for the delay in our response communication, and understand how some may disagree with our decision. With that said, in an effort to be as transparent as possible, we will outline why we decided to unwind this trade, what we are doing to prevent this from happening in the future, and what customers can expect in the event something like this happens again.
The Winlekevoss brothers decided to reverse the trade because it was empirically disruptive to an orderly market, representing a false and misleading view of the market.
We did not base our decision on the reason this order was placed (though we have no evidence to believe it was intentionally malicious), only whether or not it was disruptive. Our decision was also not based on customer type, although, since it has been asked, we will share that the customer was not an institution, not a special customer, but rather an regular individual customer just like many others on our platform.
In its user agreement, Gemini does reserve the right to reverse or cancel orders that are a disruption or malfunction.
We reserve the right to reverse and/or cancel one or more Orders in the event of (i) any disruption or malfunction in the operation of any electronic communications, trading facilities, storage facilities, recording mechanisms or other components of or integral to Gemini or of Digital Assets, or (ii) any other severe business disruption to Gemini, its systems or Digital Assets, where the nullification of transactions may be necessary for the maintenance of a fair and orderly market or the protection of you and the public interest.
Gemini management also added new pre-trade controls to automatically counter disruptions going forward. This includes an automatic cancellation of the remaining portion of any order that immediately moves the market price by more than 20% in either direction. They also added a confirmation dialogue box that warns customers before placing any order that could potentially move the market price by more than 20% in either direction
In terms of post-trade adjustments, Gemini will remove records of reversed trades from the market data API and the historical trade data on the exchange website.
Customers party to such trades will still see a record of their portion of the trade and its reversal in their account history.
In October, Gemini revealed that it received a BitLicense and launch authorization from the New York State Department of Financial Services (NYSDFS).