According to a Wall Street Journal report based on documents and interviews with former employees, crypto exchange Binance attempted to hire Gary Gensler as an advisor before he became chairman of the U.S. Securities and Exchange Commission.
The Journal said that the crypto company talked to Gensler while he was teaching at the Massachusetts Institute of Technology in 2018 and 2019. Gensler used to be the chairman of the Commodity Futures Trading Commission.
Binance tried to avoid U.S. regulatory scrutiny with a bare-bones American platform that it said was wholly separate from its more complex global operation. But private messages show the two businesses have been much more intertwined. https://t.co/a1LZGxSQzs
— The Wall Street Journal (@WSJ) March 5, 2023
Ella Zhang, then-head of Binance’s venture investing branch, and Harry Zhou, co-founder of Binance-invested firm Koi Trading, conferred with Gensler in October 2018. Zhou wrote in the conversation after Gensler declined the advisor position, “I observe that while Gensler declined advisor-ship, he was generous in sharing license strategies.”
According to a Binance employee, if the Democrats win the 2020 election, Gensler would undoubtedly be back in his post as a regulator. The second encounter between Gensler and Binance founder Changpeng Zhao was in March 2019 in Tokyo. In April 2021, Gensler became chairman of the SEC.
While at MIT, Gensler was reportedly approached by multiple private corporations to serve as an advisor, but he declined all offers.
The report emphasises the connection between Binance and its American branch, Binance.
The exchange’s executives took measures years ago to mitigate the risk of regulatory supervision, including establishing an American entity that would attract enforcement and regulatory inquiries, protecting Binance from regulatory oversight.
In a presentation called “Insulate Binance from U.S. Enforcement,” employees suggested that Binance should only have a contractual relationship with the American unit, making it a separate business.
“When Binance.US was founded, there was an agreement with the Binance.com tech team to build out the tech 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’re seeing these old communications between members of the two organisations.”
It was noted that Binance and Binance.US shared the same ultimate beneficial proprietor, a fact known to the general public from the start. However, Binance.US has recently completed a funding round, whereas Binance.com still needs to.
Binance also noted that it has no U.S. customers, and the companies are distinct legal entities. The exchange also acknowledged that it had made missteps in the past during its expansion:
“While growing at such a rapid pace, we made some initial missteps which have now been rectified. Following a massive investment in compliance talent, processes, and technology over the past two years, we are a very different company today when it comes to compliance.”
According to reports, Binance is preparing to pay fines and penalties to resolve pending regulatory and law enforcement investigations in the U.S. Patrick Hillmann, chief strategy officer of Binance, stated that the company has been working with regulators to address past compliance issues. The company says the number of people working on compliance and investigations grew 500% last year.
