Update (March 5, 9:22 pm UTC): This article has been updated to include Binance’s response.
Crypto exchange Binance is seeking to hire Gary Gensler as an adviser before becoming chairman of the United States Securities and Exchange Commission (SEC), according to a Wall Street Journal report based on messages and documents from 2018 and 2020, as well as interviews with former employees.
Gensler was approached by crypto companies while teaching at the Massachusetts Institute of Technology (MIT) in 2018 and 2019. During the team, he was also the former chairman of the Commodity Futures Trading Commission.
Messages from Binance executives seen in the newspaper indicate that Ella Zhang, then head of Binance’s venture investment arm, and Harry Zhou, founder of Binance-invested company Koi Trading, met with Gensler in October 2018. After Gensler declined the advisory position, Zhou wrote in conversation:
“I observed that even though Gensler declined the advisory ship, he generously shared his licensing strategy.”
According to a Binance employee, Gensler will “probably return to the regulator’s seat if the Dems 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 paper, Gensler was approached by several private companies to become an advisor while at MIT, which he turned down.
The report highlights the relationship between Binance and its American arm, Binance.US. Fearing regulatory scrutiny, exchange executives took steps last year to mitigate risks, including setting up an American entity that would attract enforcement and regulatory questions, thereby shielding Binance from regulatory scrutiny.
In a presentation entitled “Insulate Binance from US Enforcement”, employees suggested that Binance should have a “purely contractual” relationship with the American 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 build the technology infrastructure and provide other support for the new US regulated exchange. […] It is a white label service that supports other exchanges. That’s why you see old communications between members of the two organizations.”
The crypto exchange also noted that Binance and Binance.US “share owners with the same ultimate interests,” a fact that the public has known since the beginning. “But Binance.US recently went through a funding round, while Binance.com has not.”
Binance further noted that it has no US customers, and that the company is a separate legal entity. The exchange also acknowledged its previous “mistakes” during the expansion:
“As we grew rapidly, we made some early mistakes that we have now corrected. After investing heavily in talent, processes, and compliance technology over the past two years, we are a very different company today when it comes to compliance. .”
Binance is reportedly prepared to face fines and penalties to settle outstanding regulatory and law enforcement investigations in the United States. Binance’s chief strategy officer Patrick Hillmann said the company has been cooperating with regulators to address past compliance issues. According to the company, the number of compliance and investigations increased by 500% last year.