When Gary Gensler took over the role of chair for the United States Securities and Exchange Commission (SEC) in April 2021 he was already familiar with the crypto industry, as he had previously served as Commodity Futures Trading Commission chair, and had even been approached by Binance to become an advisor a few years earlier. Gensler’s association with Binance has come under scrutiny following the SEC’s lawsuit against the crypto exchange in June.
Gary Gensler Reportedly Approached by Binance for Advisory Role While Teaching at MIT
Before becoming SEC chair, Gensler taught at MIT as a professor of the Practice of Global Economics and Management. According to a Wall Street Journal (WSJ) report which cited messages and documents from 2018 and 2020, as well as interviews with former employees, the crypto firm approached Gensler while he was teaching at MIT in 2018 and 2019. Throughout that period, Gensler reportedly received several offers to serve as an advisor from private companies but declined them all.
WSJ documents revealed that Ella Zhang and Harry Zhou met Gensler twice to discuss offering him an advisory role. According to a Binance employee, Gensler would potentially return to a regulatory role if Democrats won in 2020.
SEC Alleges Illegal Operations by Binance and Notes Differences from FTX
The second meeting took place in March 2019 in Tokyo between Gensler and Binance’s founder Changpeng “CZ” Zhao. It was then that Gensler declined the offer. The spokesperson clarified that Binance and Binance.US shared the same owner and mentioned Binance.US’s recent funding round. The spokesperson emphasized the commitment to regulatory compliance and highlighted a 500% rise in compliance and investigations staff.
The SEC sued Binance on June 5, alleging illegal operations in the U.S. and pressing 13 charges against them. In an effort to defend itself, Binance published a statement on its Chinese social media channels on June 7, claiming it was “different” from other crypto exchanges and that it had never donated “large sums” to political candidates or made “large sponsorships”, a not-so-subtle knock on the practices of the now-defunct crypto exchange FTX. Zhao sparked Twitter debate by noting that the SEC never sued FTX, despite Gensler mentioning parallels between the two.
Gensler Notes Similarities Between Binance and FTX
Gensler, however, noted the similarities between Binance and FTX on Bloomberg TV: “There are parallels here to the FTX fraud manipulation that we saw and [what the U.S. has alleged] against Sam Bankman-Fried, where he had a sister organization, Alameda, and the special arrangements with that trading platform FTX.” In a separate interview, he criticized Binance’s lack of controls, stating it inflated token volumes and distorted numbers.
Now that Gensler is the SEC chair, his relationship with the crypto exchange is under the spotlight. Although he hasn’t faced direct accusations, questions naturally arise regarding Gensler’s appointment and Binance’s regulatory challenges. Gensler’s relationship with the exchange aside, the SEC’s lawsuit sends a clear message against unregulated crypto trading.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.