Lawyers for Binance and founder Changpeng Zhao assert that SEC Chair Gary Gensler offered to serve as an advisor to Binance’s parent company in 2019, amid his current crackdown on crypto companies.
According to documents submitted by the SEC on Wednesday, attorneys from Gibson Dunn and Latham & Watkins, both law firms representing Binance, claim that SEC Chair Gary Gensler offered his services as an advisor to the crypto exchange during multiple conversations in March 2019 with Binance executives and Changpeng Zhao. The filing further alleges that Gensler and Zhao subsequently met for lunch in Japan later that same month.
During that period, Gary Gensler held a teaching position at the Sloan School of Management at the Massachusetts Institute of Technology (MIT). However, in 2021, he was appointed by President Biden as the head of the SEC. Over the past year, Gensler has taken a stringent stance on the crypto industry, taking legal action against several companies on allegations of selling unregistered securities.
In recent days, the SEC lodged 13 charges against Binance and Changpeng Zhao, asserting that the company neglected to register as an exchange and broker-dealer, engaged in improper commingling of funds, and exhibited inadequate internal controls concerning its operations.
According to the lawyers, prior to his recent actions against Binance, SEC Chair Gary Gensler was allegedly attempting to establish a closer relationship with the company. The Wall Street Journal had previously reported on the connection between Gensler and Binance, citing internal messages from Binance and insights from an individual familiar with Gensler. These sources indicated that it was Binance who initiated contact with Gensler.
As per the recent filing, the attorneys from Gibson Dunn and Latham & Watkins state that Changpeng Zhao maintained contact with Gensler following their meeting in March. Additionally, at Gensler’s request, Zhao participated in an interview with him as part of a cryptocurrency course that Gensler was teaching at MIT. This highlights an ongoing connection and interaction between Zhao and Gensler, even beyond their initial encounter.
In the SEC’s description on Tuesday, Changpeng Zhao, who is said to reside in the UAE, was referred to as a “foreign national” known for his tendency to be “geographically elusive.” However, Zhao’s lawyers now assert that he understood Gary Gensler to be willing to act as an informal advisor, indicating a level of mutual understanding between the two parties.
According to the letter, in the latter part of 2019, Gary Gensler, scheduled to testify before the House Financial Services Committee, shared a copy of his intended testimony with Changpeng Zhao. This exchange occurred prior to Gensler’s appearance in front of the House, where he provided testimony regarding Facebook’s proposed Libra cryptocurrency and its associated Calibra wallet, which was ultimately abandoned.
In his prepared testimony, Gary Gensler explicitly stated that he does not provide advice to any financial, technology, blockchain, or other companies, nor does he possess any cryptocurrencies. His guidance to lawmakers back then closely aligns with his current public statements. Gensler emphasized the necessity of implementing regulations to safeguard against the misuse or potential abuse of customer funds, particularly concerning Facebook’s proposed wallet, Calibra, which aimed to store customer assets.