Binance Lawyers Say SEC Chairman Gensler Offered to Advise in 2019

SEC Chairman Gary Gensler mocks putting a gun to his head in response to a “Blazing Saddles” reference by Rep. Emanuel Cleaver, D-Mo., during the US Financial Services Committee hearing. Room titled “Securities and Exchange Commission Oversight”, in the Rayburn Building on Tuesday, April 18, 2023.

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SEC Chairman Gary Gensler, who is in the midst of a massive crackdown on crypto companies, offered to serve as an adviser to Binance’s parent company in 2019, according to attorneys for Binance and founder Changpeng Zhao.

Documents filed by the SEC on Wednesday indicate that attorneys for Gibson Dunn and Latham & Watkins, two of Binance’s law firms, allege that Gensler offered to serve as counsel for the crypto exchange in several March 2019 conversations with executives from Binance and Zhao. He eventually met Zhao in Japan for lunch later that month, according to the filing.

At the time, Gensler was teaching at the Sloan School of Management at the Massachusetts Institute of Technology. He was named head of the SEC in 2021 by President Biden, and over the past year he’s hit the crypto industry hard, suing numerous companies for allegedly selling unsecured securities. recorded.

Earlier this week, the SEC filed 13 charges against Binance and Zhao, alleging the company failed to register as an exchange and broker, mismixed funds, and lacked critical internal controls over its operations.

Before Gensler started going after Binance, he was trying to get close to the company, the lawyers say. THE Wall Street Journal previously reported on Gensler’s relationship with Binance, citing internal Binance messages and a person close to the SEC Chairman. Both suggested that Binance approached Gensler.

In the latest repository, the Gibson and Latham’s attorneys say Zhao continued to stay in contact with Gensler after the March meeting. And at the request of the future SEC Chairman, Zhao sat down for an interview with Gensler as part of a cryptocurrency course he was teaching at MIT.

The SEC on Tuesday described Zhao, who is believed to reside in the United Arab Emirates, as a “foreign national” with a tendency toward “geographical elusiveness.” Zhao’s attorneys now say the Zhaos understood that Gensler was “comfortable serving as an informal adviser.”

Later in 2019, according to the letter, Gensler was scheduled to testify before the House Financial Services Committee, and he sent Zhao a copy of his scheduled testimony ahead of the hearing.

In July of that year, Gensler testified before the House about the Libra cryptocurrency proposed and then canceled by Facebook and its planned Calibra wallet.

“I do not advise any financial, technology, blockchain or other company, and I do not own any cryptocurrency,” Gensler’s testimonial prepared. read.

Gensler’s advice to lawmakers then was largely the same as his public statements today. He said that with Facebook considering a wallet to store customer assets, rules needed to be in place “to guard against the potential use or misuse of these funds by Calibra.”

He also testified more broadly in language that resembles his last statements.

“We must guard against illicit activities, such as tax evasion, money laundering, terrorist financing and avoid sanctions,” he said at the time. “We need to protect the privacy of individuals.”

Due to Gensler’s ties to Zhao, attorneys for Binance said they have sought his disqualification from any action regarding the company. They say they received no acknowledgment from SEC staff.

An SEC spokesperson said in a statement to CNBC that “the president is fully aware of and fully respects his ethical obligations, including any recusal obligations.”

SEC investigations into Binance.US and Binance began in 2020 and 2021 respectively, well after Gensler and Zhao’s last alleged contact.

SHOW: The SEC is waging war on the crypto industry


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