Cryptocurrency exchange Binance sought to hire Gary Gensler as an adviser before he became chairman of the United States Securities and Exchange Commission, according to a Wall Street Journal report based on messages and documents from 2018 and 2020, as well as interviews with former employees.
Gensler, the former chairman of the Commodity Futures Trading Commission, was contacted by the crypto firm in 2018 and 2019 while teaching at the Massachusetts Institute of Technology, the Journal reported.
Messages from Binance executives seen by the newspaper indicate that Ella Zhang, then head of Binance’s venture investment arm, and Harry Zhou, co-founder of Binance-invested firm Koi Trading, met with Gensler in October 2018. After Gensler turned down the advisory position, Zhou wrote in the chat:
“I note that while Gensler declined advice, he was generous in sharing licensing strategies.”
According to a Binance employee, Gensler “would likely return to a regulators seat if the Democrats win the 2020 election.” The second meeting took place in March 2019 in Tokyo between Gensler and Binance founder Changpeng “CZ” Zhao. In April 2021, Gensler became SEC Chairman.
According to the newspaper, Gensler was approached by several private companies to serve as a consultant while at MIT, but he turned down all offers.
The report highlights the relationship between Binance and its US arm, Binance.US. Fearing regulatory scrutiny, executives at the exchange took steps years ago to mitigate risk, including creating a US entity that would attract regulatory and compliance inquiries, thus shielding Binance from regulatory oversight.
In a presentation titled “Isolate Binance from the US Enforcement”, the employees suggested that Binance should have a “purely contractual” relationship with the US unit, positioning it as a separate operation.
A Binance spokesperson told Cointelegraph:
“When Binance.US was founded, there was an agreement with the Binance.com technology team to develop the technology infrastructure and provide other forms of support for the new US-regulated exchange. […] It was a white label service that supported other exchanges. That is why you are seeing these old communications between members of the two organizations.”
The cryptocurrency exchange also noted that Binance and Binance.US “shared the same beneficial owner,” a fact known to the public from the start. “Binance.US, however, has recently gone through a funding round, while Binance.com has not.”
Binance further noted that it has no clients in the US and that the companies are separate legal entities. The exchange also acknowledged previous “missteps” during its expansion:
“While growing at such a fast pace, we made some initial mistakes that have now been corrected. After a massive investment in compliance talent, processes and technology over the last two years, today we are a very different company when it comes to compliance.”
Binance is reportedly preparing to face fines and penalties in order to resolve pending regulatory and law enforcement investigations in the United States. Binance chief strategy officer Patrick Hillmann said that the company has been working with regulators to fix past compliance issues. According to the company, the compliance and investigations headcount increased by 500% last year.
Update (March 5, 9:22pm UTC): This article has been updated to include Binance’s response.
