Update (March 5, 9:22pm UTC): This article has been updated to include Binance's response.
Cryptocurrency exchange Binance sought to hire Gary Gensler as an adviser before he became 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.
The crypto company approached Gensler while he was teaching at the Massachusetts Institute of Technology (MIT) in 2018 and 2019. During that time, he was also the chairman of the Commodity Futures Trading Commission.
Messages from Binance executives seen by the newspaper indicate that Ella Zhang, then head of Binance's venture investment arm, and Harry Zhou, co-founder of Binance-invested firm Koi Trading, met with Gensler in October 2018. After Gensler turned down the advisory position, Zhou wrote in the chat:
"I note that while Gensler declined advice, he was generous in sharing licensing strategies."
According to a Binance employee, Gensler "would likely return to a regulators role if the Democrats 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 newspaper, Gensler was approached by several private companies to serve as a consultant while at MIT, which he declined.
The report highlights the relationship between Binance and its US arm, Binance.US. Fearing regulatory scrutiny, executives at the exchange took steps years ago to mitigate risk, including creating a US entity that would attract regulatory and compliance inquiries, thus shielding Binance from regulatory oversight.
In a presentation titled โIsolating Binance from the US application,โ the employees suggested that Binance should have a โpurely contractualโ relationship with the US unit, positioning them as separate operations.
A Binance spokesperson told Cointelegraph:
โWhen Binance.US was founded, there was an agreement with the Binance.com technology team to develop the technology infrastructure and provide other forms of support for the new US-regulated exchange. [...] It was a white label service that supported other exchanges. That's why you're seeing these old communications between members of the two organizations."
The cryptocurrency exchange also noted that Binance and Binance.US "shared the same beneficial owner," a fact known to the public from the start. โBinance.US, however, has recently gone through a funding round, while Binance.com has not.โ
Binance further noted that it does not have any clients in the US and that the companies are separate legal entities. The exchange also acknowledged previous "missteps" during its expansion:
"While we grew at such a rapid pace, we made some early mistakes that have now been corrected. After a massive investment in fulfillment talent, processes and technology over the past two years, today we are a very different company when it comes to compliance. ."
It is reported that Binance preparing to face fines and penalties in order to resolve pending regulatory and law enforcement investigations in the United States. Binance chief strategy officer Patrick Hillmann said that the company has been working with regulators to fix past compliance issues. According to the company, the compliance and investigations headcount increased by 500% last year.
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