CONTROL FAILURES: CFTC'S ENCRYPTION BUSINESS WITH THE TRUMP FAMILY

Original by Sharon LaFraniere, David Yafe-Bellany, The New York Times

This post is part of our special coverage Syria Protests 2011

LAST AUTUMN, AN INTEREST CONTEST WAS HELD IN THE PRESENCE OF A FEDERAL AGENCY WHOSE NAME IS UNKNOWN. THREE BUSINESSES ASSOCIATED WITH THE TRAMP FAMILY BUSINESS LANDSCAPE ARE EXPECTED TO BE APPROVED BY THE UNITED STATES COMMODITY FUTURES TRADING COMMISSION (CFTC) TO EXPAND THEIR OPERATIONS IN THE EXTREMELY HOT FORECAST MARKET AREA。

The market is now projected to be a growing part of the Agency ' s regulatory operations. Americans can bet on events as small as the color of President Trump's tie next time, and as large as if the United States would take over Cuba. The market holds enormous business opportunities, but the way several businesses operate has also given rise to controversy。

Senior agency public officials are concerned about this: they are worried about & nbsp; Cripto.com  they have failed to fairly treat small stake users; there are perceived gaps in Polymarket's anti-fraud protection system; and a third enterprise, a subsidiary of the encryption money company Gemini, has not even passed the compliance review required to open its business。

Many knowledgeable individuals chose anonymous disclosure for fear of reprisals, and despite internal objections, Caroline D. Pham, then Acting Chairman of the Commission, and his chief legal adviser intervened to help the enterprises achieve their objectives。

On the eve of Christmas, the Agency suspended two senior managers challenging the above-mentioned enterprises, banned them from entering the premises and initiated an internal investigation into the two individuals. The same treatment was also met by three other senior officials responsible for the enforcement of encrypted currency, which is also closely linked to the Trump family。

The officials were never informed of their own faults. In interviews, however, both current and outgoing staff indicated that the matter sent a clear signal to the staff of the organization that it would not cause problems in these industries。

The New York Times survey showed that the central agency responsible for regulating financial subdivisions was repeatedly held hostage by large interest groups that should have been subject to it, and that the suspension of officials involved was only a microcosm。

The survey found that over the past 16 months of the Trump administration, the Commission has steadily reduced its staffing, cleaned up senior public officials, significantly tightened enforcement against the encrypted money industry and facilitated the forecasting of market enterprises in all respects。

The Trump family is deeply bound up with the encrypted currency and forecast market industry, which is also an important reason for the significant weakening of the regulatory body ' s functions. The Trump family issues its own digital currency as a means of seizing huge amounts of wealth, while also working commercially with a number of forecast market operators。

The many high-level levels that have contributed to the transformation of the Commission are themselves of interest to these industries. After the departure of Caroline D. Pham, she joined an encrypted currency business that worked with Polymark; her chief legal adviser, Brigitte Weyls, was employed in a forecast market business, whose previous business applications were successfully advanced with her assistance。

Michael S. Selig, the current 36-year-old Chairman of the Commission, previously served as a corporate lawyer for several encrypted money companies and was deeply involved in forecasting market-related operations. He was appointed by Trump and belonged to the Republican camp. Since the President has been vacant of other seats on the Commission, he is now the only member of the body。

This very special personnel arrangement gives Michael S. Selig the discretion to initiate legal proceedings and make new regulations, with full powers to regulate the two industries that are at the heart of the Trump commercial empire。

The White House spokesman, Davis Ingle, stated that “all decisions taken by President Trump are in the best interests of the American public, and there is no conflict of interest whatsoever.”

The shift in the position of the regulator also confirms how the Trump Government forced an independent regulator to submit to its will, and the United States Securities and Exchange Commission has experienced similar changes. Today, both institutions share the President ' s view that previous sanctions imposed by regulators on various sectors are too stringent。

Gretchen Lowe, who worked for 30 years in this institution and has just retired from top law enforcement positions last year, said: "I have been through many Republican and Democratic governments, and everyone in the past was convinced that the law must be enforced. This is the first time that political factors have influenced the CTC in such a dramatic way.”

Neither Caroline D. Pham nor Brigitte Weyls responded to the request. However, Caroline D. Pham made a public statement last year accusing the agency of abusing its prosecutorial powers。

Polymarket states that it has well-established risk protection mechanisms; Cripto.com  claims that the company strictly adheres to all federal regulations; and Gemini has not responded. The female spokesperson of the CTC refused to talk about what had happened to the staff members involved and about the institutional handling of specific cases。

The weakening of regulatory power exposes millions of people involved in encrypted currency transactions, investing in forecast markets and the increasingly interconnected overall financial system. Fraud and irregularities have always been difficult to combat in both industries: fraud in the area of encrypted currency is widespread, and insider trading in the market is expected to become a major problem。

In his interview, Michael S. Selig stated that during the Biden administration, the Commission had overstepped the law and had resorted to the courts for even minor violations. He stressed that the institution would now focus on serious violations without favouring either side。

He said: "Where there is fraud, market manipulation, irregularities, insider trading and so on, our law enforcement will be vigilant and responsible

However, these strong statements are in stark contrast to the actual law enforcement record of the institutions during the second term of Tripp. At present, the Commission has only established two cases relating to digital currency, which are aimed at individual operators and do not provoke any head-encrypted money enterprises。

During the Biden regime, more than 80 cases were dealt with through the civil courts or administrative channels. Even in the first term of office of Trump, when his family had not been involved in the encryption industry, the Commission had investigated more than 20 related cases。

In the area of predictive market regulation, the Commission was transformed from a regulator to an industry ally in the face of legal disputes over industry compliance. For the second term of office of Trump, only one case has been filed by the institution, against an individual accused of insider trading。

THE ORIGINAL OBJECTIVE OF THE CFTC, WHICH WAS PRIMARILY TO REGULATE IRREGULARITIES IN THE MARKET FOR AGRICULTURAL PRODUCTS, SUCH AS BOUQUETS, IS TO EXPAND ITS REGULATORY RESPONSIBILITIES AND CONTINUE TO WEAKEN ITS ENFORCEMENT。

The market is now expected to grow rapidly and to fall within the realm of speculative financial transactions, which is within the purview of the Agency. Two major mainstream platforms, with a total of $50 billion in transactions throughout 2025, reached that level this year in only three or four months。

The White House is currently promoting relevant legislation, and plans are under way to further expand the Commission ' s regulatory powers and give it additional regulatory responsibility in the area of encrypted currency。

At the same time, the Trump Government has continued to reduce institutional staff. The sector was streamlined, with a peak of about 760 employees in 2015. As of March this year, only about 550 people remained in service, down from the lowest level since the 2009 financial crisis。

In the area of encrypted currency: overall law enforcement retreat

IN FEBRUARY 2025, TRUMP TOOK UP ONE MONTH OF OFFICE AND SEVERAL LAWYERS FROM CFTC WERE ON EXTENDED WEEKENDS FOR THE PRESIDENCY. SOME PEOPLE ARE RESTING IN WHITE CABINS IN SKI TOWN, VERMONT, AND OTHERS ARE TRAVELLING TO NEW YORK TO WATCH CLASSICAL CONCERTS。

The urgent cell phone ringing suddenly interrupted the holidays. The caller was Brian Young, the head of the agency ' s law enforcement department, who conveyed the instructions given by Caroline D. Pham。

Caroline D. Pham, 45 years old, was an intern at the Institute in the early years, with extensive human resources, and has been swimming between government departments and the financial industry. In 2022, there was a Republican seat vacancy in the Joint Committee of the two parties, and President Biden appointed her as a member。

After Trump was promoted as Acting Chairperson, she acted in a bold manner and often shared photographs with senior business executives in regulated industries. On the other hand, the order she issued during this holiday was unexpected and difficult to implement: the lawyers' team was asked to dismiss the institution's action against the encrypted money company KuCoin。

This is a very serious case for a small committee。

DURING THE BIDEN GOVERNMENT, THE VAST MAJORITY OF ENCRYPTED CURRENCIES WERE REGULATED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, WHICH CONSIDERED THEM TO BE STOCKS, BONDS IN CIRCULATION ON WALL STREET. BUT THE TECHNICAL NATURE OF THE ENCRYPTED CURRENCY GIVES THE CTC THE RIGHT TO REGULATE SOME SPECULATIVE TRANSACTIONS, INCLUDING THE WORLD’S LARGEST DIGITAL CURRENCY, BITCOIN。

Prior to that, the Commission had set aside a $1.35 billion fine for the world ' s largest encrypted currency exchange, becoming a landmark case for industry. The prosecution of KuCoin was also an important initiative for agencies to pass on to the market a strictly regulated and encrypted monetary attitude。

KuCoin, based in Seychelles, had just pleaded guilty to a lawsuit initiated by the United States Department of Justice, agreeing to pay a fine of nearly $300 million. The Ministry of Justice accused the platform of disregarding relevant laws to combat crime and prevent illegal trade. At the same time, KuCoin initially agreed to a settlement and should take action against CFTC for its alleged unlicensed business。

Caroline D. Pham does not have the right to dismiss the case directly, and the matter requires the support of a majority of the Committee. However, two Democrats were still in office and she had little chance of success。

In the event, the team opted for a compromise: they reworked the settlement agreement and invoked Trump's executive order in the trial, calling for a more inclusive approach to the encryption money industry。

Just during the negotiations between the two sides, KuCoin announced two new digital currencies on the line, issued by World Liberty Financial, an encrypted money start-up under the umbrella of the Trump family. The introduction of the new currency has greatly increased the industry visibility of the family enterprise and helped to expand its user base。

The case was delayed until March this year, when CFTC reached a settlement with KuCoin. The KuCoin parent company was eventually fined only $500,000, far below the millions of dollars originally estimated by the legal team。

KuCoin issued a statement stating that the currency on the line was only normal business layout and had nothing to do with the litigation it faced. A spokesperson for World Liberty Financial also stated that the company ' s digital currency had been placed on several exchanges。

According to official documents and disclosures from the employees who left the office, the Commission also withdrew its investigation into at least five other encrypted money enterprises, including the later verification of a large exchange。

In the spring of 2025, Caroline D. Pham ' s team launched an investigation against three high-level law enforcement officials responsible for encrypted currency cases, and the whole sector was in a state of panic. The three individuals are Gretchen Lowe, Chief Legal Adviser and First Deputy to Law Enforcement, Manal Sultan, Deputy Director of Law Enforcement, and K. Brent Tomer, Chief Barrister。

The official reasons for the investigation are vague and refer only to the “inappropriate handling of some law enforcement matters”。

Subsequently, the Government dismissed Manal Sultan and K. Brent Tomer on the grounds of streamlining the structure; two barristers in charge of encrypted currency cases were demoted and Gretchen Lowe chose to leave。

In an interview with several former agency officials, Caroline D. Pham was deliberately targeted at law enforcement officers dealing with encrypted currency cases. Andrew Rodgers, a former barrister who left last year, said: "Someone has been deliberately crowding out law enforcement personnel responsible for major encrypted money cases."

Joe Konizeski, a former Chicago branch lawyer, stated that he had received instructions twice before being retrenched last summer to discontinue the investigation of the encrypted money operator。

HE COMMENTED THAT "THE ATTITUDE OF THE CFTC IS TANTAMOUNT TO INFORMING VIOLATORS IN THE AREA OF ENCRYPTED CURRENCY THAT THEY WILL NO LONGER BE HELD ACCOUNTABLE BY THE REGULATOR."

The President himself

For Gemini, it is too late for regulatory enforcement to retreat. In January 2025, on the eve of the scheduled session, Gemini settled and paid a fine of $5 million. The company was previously accused of misleading the Commission staff during a bitcoin auction。

Gemini, however, has evaded other possible charges in this case。

The founder of Gemini, Cameron Winklevoss and Tyler Winklevoss were heavily hit by the Tramp. Not only are they political donors, sponsors of White House activities, but they are also part of a private club in the name of Trump's eldest son, Donald Trump Jr., and they are also funding the encryption money enterprise that was launched by Eric Trump, another son of Trump。

In the settlement agreement, Gemini did not admit that he had committed violations and promised not to publicly declare the charges unfounded. Only five months later, however, the company filed a complaint with the Inspector-General of the Commission, criticizing the case and the legal officers who conducted it。

Tyler Winklevoss published this complaint on platform X, accusing them of "abuse of power by public officials who spend millions of taxpayers ' funds to initiate utilitarian proceedings against Gemini and to pave the way for their own career "

According to the information received, the Winclayworth brothers did not desist from doing so and tried to use the appointment of the Supreme Head of the Complaints Commission。

During the temporary chairmanship of Caroline D. Pham, Trump nominated Brian Quintenz as the head of the body in February 2025. Brian Quintenz was a member of the Committee and a director of a forecast market enterprise. In September, however, he indicated through social media that his nomination had finally failed because of his refusal to pledge support for Gemini ' s complaint against the Committee。

Brian Quintenz made public some of his private chat records, in which Tyler Winklevoss asked him to give Gemini's complaint the highest priority and also stated that he was happy to personally present it to the President。

Brian Quintenz wrote that, after he refused to cooperate, the Winclayworth brothers complained to Trump. At the end of September, Trump officially withdrew his nomination。

At the time, Gemini's spokesperson refused to respond to the chat. According to the White House spokesman, the President would only nominate people whose ideas were consistent with his own approach to governance and who were committed to United States priorities. Michael S. Selig did not comment on Gemini ' s complaint。

Multi-intervention regulatory approval

Gemini has more claims to follow。

Gemini Titan, a subsidiary of his company, has been trying to enter the forecast market since 2020, but has not been approved by the Commission. Last year, Gemini once again submitted a business application。

Last December, when staff members were in the process of reviewing the application, they suddenly received a special memorandum issued by Brigitte Weyls recommending the approval of the application directly。

In accordance with the normal process, such approval proposals should have been written by line staff and re-submitted to the Commissioners, and the review was still ongoing. Even so, Gemini Titan's application was quickly approved。

According to sources, this is only the third case of Caroline D. Pham and Brigitte Weyls, who have repeatedly favoured forecast market enterprises with which the Trump family works。

Tripp, Cripto.com , at the beginning of his second term; has acquired the qualifications for forecasting the operation of the market. However, the short notes contained in a publicly filed file of the company raised the alarm of some staff members. They suspect that Cripto.com  is secretly granted a privilege to large trading institutions, leading them to ordinary sports users, but that this act has not been properly disclosed。

According to the source, Caroline D. Pham and Brigitte Weyls not only discouraged staff from pursuing the matter, but also excluded them from communication meetings with   Cripto.com 。

Cripto.com  the management refused to comment on the details of the communication with the Board, stating that the company ' s operating rules were open and transparent, that all users enjoyed a fair environment and that information disclosures were fully compliant。

Crypto.com  a close business partner with Trump Media Science Group, which is itself the largest shareholder of the listed company. In October last year, the two sides reached exclusive cooperation in the joint layout of forecast market operations. Trump Media Technology Group did not respond to the request。

The most far-reaching events revolve around Polymark. Over the years, the enterprise has been interviewed repeatedly by the regulatory authorities for irregularities. In 2022, Polymarket paid a fine of $1.4 million to the Commission for opening its business to United States users without permission。

In November 2024, the old case was brought back after the United States general election had passed. The FBI raided the company's founder, Shayne Coplan, in New York, and the CFTC launched a simultaneous investigation。

The Trump government dropped both investigations in July of the following year. In the same month, Polymarket acquired a compliance-qualified enterprise, thereby launching a new platform for United States users。

The following month, Polymarket submitted a new application for permission to take on the betting business through intermediary channels. This model, while helping businesses to expand their customers, also allows violators who use insider information to hide their whereabouts and circumvent regulatory controls。

Less than two weeks after the submission of the application, Polymarket announced that it had received funding from the Investment Agency, which was held in part by Donald Trump Jr. In addition, Donald Trump Jr. was hired as a unpaid consultant. According to the spokesperson for Donald Trump Jr., he was not involved in matters between Polymark and the federal regulatory authorities。

In the autumn of last year, the United States Government was put on a standstill for about six weeks, and even so, the Committee brought together staff to process Polymarket's application。

At a communication meeting between the two sides in November, Rahul Varma, Interim Head of the Market Regulatory Authority, and Rachel Berdansky, Deputy Director of Compliance, questioned Polymarket ' s anti-fraud protection capabilities. In this review, Brigitte Weyls participated on an exceptional basis。

Just the week after Polymarket ' s application was approved, Rachel Berdansky was administratively suspended and investigated, and she is now officially retired. By the end of last year Rahul Varma was also discharged。

Vince McGonagle, the former head of the department, who had previously been reassigned for suspension of the Gemini application, also chose to leave after his suspension。

Over the past year, a large number of staff have separated, reducing the total number of staff by about a quarter, representing the largest annual loss in nearly two decades. In the face of this downsizing, the Committee's female spokesperson continued to state that the existing staff was sufficient to carry out its supervisory functions。

Caroline D. Pham and Brigitte Weyls subsequently also left the civil service to join the industry under the supervision of the Agency. A senior member of the Commission indicated that both reassignments were in compliance with federal ethics。

In March this year, Brigitte Weyls officially became the general legal adviser to Gemini Titan, a company that she had been able to secure. Caroline D. Pham resigned as Acting Chairman last December to join MoonPay, an encrypted money company that also plans to set up a market forecast and has long announced exclusive cooperation with Polymucket。

New regulatory landscape

Michael S. Selig, who took office last December, became the only top officer on the committee。

Following the departure of other members, Trump appointed only one of them to replace him, leaving all the seats vacant. Such an approach would break with the Commission ' s original system of checks and balances and give the incoming President the absolute power to reshape the entire body。

Shortly after his appointment, Michael S. Selig frequently attended industry meetings and made a television podcast. He criticized false public opinion and called the market a "truth machine" capable of producing real information. In a number of major policy disputes, he has been on the side of the encrypted money industry and has even brought lawsuits against several state governments that are trying to regulate the projected market for sports。

In an interview with The New York Times, Michael S. Selig promised to revitalize law enforcement and indicated that the agency was expanding its staff。

IN REALITY, HOWEVER, THE NUMBER OF LAW ENFORCEMENT OFFICERS IN THE SECTOR WAS 105, WITH ONLY THREE NEW POSTS BEING ADDED. AT THE SAME TIME, THE WHITE HOUSE CONTINUES TO PUSH FOR READJUSTMENTS OF POWER, WITH PLANS TO TRANSFER MORE ENCRYPTION MONEY FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION TO CFTC, WHICH IS SEVEN TIMES LARGER THAN THE LATTER。

One of the Commission ' s most topical law enforcement cases this year has also revealed a shift in regulatory direction. Last month, the United States Department of Justice, together with the Commission, indicted a soldier of the United States military special forces for using classified information to bet the Venezuelan President Nicolás Maduro that had been removed from the Polymarket platform and that the soldier himself had participated in the operation。

Michael S. Selig used this case as evidence of the institution ' s strict regulation of the industry。

However, one of the key details in the indictment is interesting: the soldier was placed on an international platform in Polymarket. As early as the 2022 settlement, Polymarket promised to completely isolate the international platform from U.S. users. The indictment also mentioned that the soldier had used a web-based tool prohibited by Polymarket to log on to the platform without official reference to his specific location。

Professor Joseph A. Grundfest, Professor at Stanford University Law School, in the field of long-term research into forecasting markets, argued that the supervisory authority should look thoroughly at Polymarket and its operating model, rather than hold the soldier accountable. He said, “The discovery of an ant means that there is always an entire community behind it.”

After the case came to light, Polymarket founder Shayne Coplan stated that the platform first identified anomalies, reported leads and cooperated with the investigation. When asked whether Polymarket would be thoroughly checked, the Committee ' s female spokesperson did not respond。

However, Michael S. Selig, in his public address, repeatedly referred to Shayne Coplan's past dispute with the regulator。

In March of this year, he attended an event in Washington sponsored by the Digital Chamber of Commerce, an industry organization that speaks for companies that encrypt money and forecast markets. He was interviewed on the stage by Teresa Goody Guillén, the lawyer representing the founder of Bian. In 2023, it paid a $150 million fine to CFTC。

Michael S. Selig publicly criticized the "law-enforcement-led regulatory model" and described Polymarket's experience as a typical case. “Law enforcement even went to search the premises of the founders of the enterprise. Fortunately, today everything is in a new state.”