According to lawyers representing Binance and its founder, Changpeng Zhao, Gary Gensler, the current Securities and Exchange Commission (SEC) Chair, offered to serve as an advisor to Binance’s parent company in 2019. The SEC filed documents on Wednesday indicating that attorneys from Gibson Dunn and Latham & Watkins, two of Binance’s law firms, allege that Gensler had several conversations with Binance executives and Zhao in March 2019 where he expressed his willingness to advise the crypto exchange. The filing further claims that Gensler met Zhao in Japan for lunch later that month.
At the time of the alleged conversations, Gensler was teaching at the Massachusetts Institute of Technology’s Sloan School of Management. However, he was appointed as the head of the SEC in 2021 by President Biden and has recently been cracking down on the crypto industry, suing several companies for allegedly selling unregistered securities.
Earlier this week, the SEC filed 13 charges against Binance and Zhao, alleging that the company failed to register as an exchange and broker-dealer, improperly commingled funds, and lacked critical internal controls over its businesses.
Gensler’s Relationship with Binance
Before Gensler started going after Binance, lawyers representing the company claim that he was trying to cozy up to the company. The Wall Street Journal previously reported on Gensler and Binance’s relationship, citing internal Binance messages and a person close to the SEC chair. Both sources suggested that Binance approached Gensler.
The Gibson and Latham attorneys say that after the March meeting, Zhao continued to stay in touch with Gensler. At Gensler’s request, Zhao sat down for an interview with him as part of a cryptocurrency course he was teaching at MIT.
Later in 2019, Gensler sent Zhao a copy of his intended testimony ahead of a House Financial Services Committee hearing where he was slated to testify. In July of that year, Gensler testified before the House over Facebook’s proposed and later canceled cryptocurrency Libra and its planned Calibra wallet.
Gensler’s advice to lawmakers at the time was largely the same as his public statements today. He said that rules needed to be in place “to guard against Calibra’s use or potential abuse of such customer funds” and that “we must guard against illicit activities, such as tax evasion, money laundering, terrorist financing and avoiding sanctions.”
Because of Gensler’s ties to Zhao, Binance’s lawyers requested his recusal from any actions regarding the company. However, they claim to have received no acknowledgement from SEC staff.
An SEC spokesperson stated that “the Chair is very familiar with and in full compliance with his ethical obligations, including any recusal obligations.”
The SEC’s investigations into Binance.US and Binance began in 2020 and 2021, respectively, well after Gensler and Zhao’s last alleged contact.
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