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SEC Chair Gary Gensler offered his services as an advisor to Binance in 2019, according to the crypto exchange’s lawyers. They allege that Gensler had several conversations with Binance executives and founder Changpeng Zhao prior to taking up his post at the SEC, and met Zhao in Japan for lunch.
The report of Gensler and Zhao’s prior encounters comes amid an ongoing court battle between the SEC and Binance over alleged U.S. securities violations.
It emerged after the SEC filed documents, this Wednesday, in which attorneys from Gibson Dunn and Latham & Watkins—two of Binance’s law firms—alleged that Gensler offered to act as an advisor to the crypto exchange.
When Gensler made the alleged offer in March 2019, he was working as a professor of Practice of Global Economics and Management at Massachusetts Institute of Technology’s Sloan School of Management.
SEC vs Binance
Since Gensler’s 2021 appointment as Chair of the SEC by President Biden, the regulator has cracked down on the crypto industry—with the SEC pursuing court cases against crypto exchanges Coinbase, Bittrex, and Kraken. Only days ago, Gensler said that, "We don’t need more digital currency", claiming that the crypto business model is "built on non-compliance".
The recently filed documents suggest Zhao stayed in touch with Gensler after their March 2019 encounter, with the Binance founder recording an interview with Gensler as part of the MIT cryptocurrency course that he was teaching at the time.
Later that year, in July 2019, Gensler testified in front of the House Financial Services Committee over Facebook's proposed cryptocurrency and wallet, both of which were later canceled. Before the hearing, the letter said, Gensler sent Zhao a copy of his testimony in which he said, "I do not advise any financial, technology, blockchain or other companies, nor do I own any cryptocurrencies."
His sentiment in that hearing doesn’t appear to differ substantially from his current position on cryptocurrency. "We must guard against illicit activities, such as tax evasion, money laundering, terrorist financing and avoiding sanctions,” he told lawmakers. “We must protect individuals’ privacy."
He also stated that rules must be put in place “to guard against Calibra’s [Facebook's crypto wallet] use or potential abuse of such customer funds.”
Binance's lawyers have requested that the SEC Chair recuse himself from actions regarding the company, citing his alleged ties to Zhao, and claim that the SEC has yet to acknowledge their request. The SEC, for its part, claimed in a statement that Gensler is “very familiar with and in full compliance with his ethical obligations including any recusal obligations.”