Binance Tried to Hire Gary Gensler in 2018 for Closer Ties with US Regulators: Report

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Crypto exchange Binance sought to hire Gary Gensler as an adviser before becoming chairman of the United States Securities and Exchange Commission, according to a Wall Street Journal report based on messages and documents from 2018 and 2020, as well as interviews with former employees.

Gensler, the former chairman of the Commodity Futures Trading Commission, was approached by the crypto firm in 2018 and 2019 while teaching at the Massachusetts Institute of Technology, the Journal reported.

Messages from Binance executives seen by the newspaper indicate that Ella Zhang, then head of Binance’s venture capital investment arm, and Harry Zhou, co-founder of Binance’s investment firm Koi Trading, met Gensler in October 2018. After Gensler turned down the adviser job, Zhou wrote in the chat:

“I observe that even though Gensler declined the adviser position, he was generous in sharing licensing strategies.”

According to a Binance employee, Gensler would “likely be back in a regulator 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 the chairman of the SEC.

According to the newspaper, Gensler was approached by several private companies to serve as an adviser to MIT, but he declined all offers.

The report sheds light on the relationship between Binance and its US arm, Binance.US. Fearing regulatory scrutiny, exchange executives took steps years ago to mitigate the risk, including creating a U.S. entity that would attract law enforcement and regulatory investigations, shielding Binance from regulatory scrutiny. .

In a presentation titled “Isolate Binance from the US App,” employees suggested that Binance should have a “purely contractual” relationship with the US unit, positioning it as a separate operation.

A Binance spokesperson told Cointelegraph:

“When Binance.US was founded, there was an agreement with the technical 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, which is why you see these old communications between members of the two organizations.

The crypto exchange also noted that Binance and Binance.US “share the same ultimate beneficial owner,” a fact known to the public from the start. “However, Binance.US recently went through a funding cycle, unlike”

Binance further noticed that it has no US customers and the companies are separate legal entities. The exchange also acknowledged previous “missteps” during its expansion:

“As we grew at such a rapid pace, we made some initial missteps which have now been rectified. Following a massive investment in talent, process and compliance technology over the past two years, we are today a very different company when it comes to compliance.

Binance is reportedly preparing to face fines and penalties to settle outstanding regulatory and police investigations in the United States. Binance Chief Strategy Officer Patrick Hillmann said the company is working with regulators to resolve past compliance issues. According to the company, the compliance and investigations workforce grew by 500% last year.

Update (March 5, 21:22 UTC): This article has been updated to include Binance’s response.