SEC offered to be advisor to a crypto company in 2019, according to Binance attorneys.
Lawyers representing Binance and its CEO Changpeng Zhao claim that SEC chair Gary Gensler was offered a position as an advisor to Binance’s parent company in 2019. This is interesting because Gensler has been leading the crackdown on the crypto industry over the past year. Binance and other crypto companies are currently being scrutinized by the US regulator for violating securities laws. Gensler has expressed his negative stance towards crypto and crypto companies multiple times. In March, he mentioned that just because a crypto trading platform claims to be a qualified custodian does not mean that it actually is.
SEC Chair Could Become an Advisor to Binance in 2019
The offer to make Gensler an advisor to Binance came to light after recent filings against the company, which include violations of securities laws, flouting KYC rules, and more. Two law firms representing Binance, Gibson Dunn and Latham & Watkins, filed documents claiming that Gensler was offered the position in several conversations with Binance executives and Zhao in March 2019. The filing also stated that Gensler met with the Binance CEO in Japan for lunch later that month.
At the time Gensler was offered the advisor position at Binance, he was not yet the boss at the SEC. He was teaching at the Massachusetts Institute of Technology’s Sloan School of Management. President Joe Biden later appointed him to head the Commission in 2021. However, Gensler has been tough on the crypto market, targeting numerous companies and suing them for allegedly selling unregistered securities. It has been a dramatic week for the crypto industry as the SEC filed 13 charges against Binance and Zhao. The regulator claimed that the company did not register as an exchange and broker-dealer. It also alleged that Binance and Zhao put investors at risk to fund their own pockets.
Zhao-Gensler Relationship before SEC’s Crypto Crackdown
Furthermore, lawyers claim that Zhao maintained contact with Gensler after their lunch meeting in March. The Binance CEO granted Gensler’s request for an interview as part of a crypto course he was teaching at MIT. Later that year, the future SEC boss shared a copy of his intended testimony with Zhao. He was going to testify before the House Financial Services Committee. Testifying before the House over Facebook’s proposed but failed crypto Libra and the Calibra wallet, the MIT professor noted:
- Bitcoin traders unconcerned about SEC action against Binance and blockchain.
- Binance.US delisting 40 pairs, OTC trading paused.
- Binance CEO summoned by US District Court over SEC action.
“I do not advise any financial, technology, blockchain or other companies, nor do I own any cryptocurrencies.”
After Gensler proposed the advisor idea in 2019, SEC investigations and lawsuits against Binance US and Binance began in 2020 and 2021, respectively.