Binance lawyers have revealed that prior to becoming the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler offered up his advisory services to the exchange.
As the SEC’s lawsuit against Binance heats up, these attorneys say Gensler should thus recuse himself from the case, given his history with Binance and its founder and owner Changpeng Zhao.
Gensler Once Offered To Work For Binance
Binance’s legal team claims that SEC boss Gary Gensler previously offered to be an advisor to the cryptocurrency behemoth.
As per documents filed by the SEC on June 7, attorneys from Gibson & Dunn and Latham & Watkins — two of Binance’s law firms — alleged that Gensler offered to serve as an advisor to the exchange in March 2019 — not all that long ago. Gensler allegedly had several conversations with Binance execs, including Changpeng Zhao, before eventually meeting CZ in Japan for lunch, where they discussed the BNB token and Binance launching an exchange in the United States.
At the time, Gensler was a professor of the practice of global economics and management at Massachusetts Institute of Technology’s Sloan School of Management. Nonetheless, he and Zhao kept in touch after the March meeting, and the Binance boss “understood that the now-Chairman was comfortable serving as an informal advisor,” something that Gensler had suggested, the filing claims. Zhao even accepted Gensler’s request and sat down with him to interview as part of a crypto course he was tutoring at MIT.
The lawyers claim Gensler was trying to get in good with Binance before he started going after the exchange. Gensler, sworn into office on April 17, 2021, alleged on Monday that Binance, the world’s largest crypto asset exchange by volume, was operated through a “web of deception” by Zhao and commingled customer funds and shortly after announcing this lawsuit, the SEC sought an emergency order to freeze all assets on Binance.US.
Back in 2019, Gensler was scheduled to testify before the House Financial Services Committee, and he forwarded Zhao a copy of his planned testimony ahead of the hearing for advice, Binance’s lawyers revealed.
However, although the letter by the exchange’s legal team makes it appear that Gensler himself pitched Binance on the advisory position idea, a March report from the Wall Street Journal indicated that Binance had first approached the now SEC chairman. The WSJ cited internal messages and records from 2018 to 2020, claiming that the then head of Binance’s venture investing arm Ella Zhang, and Harry Zhou, co-founder of Binance-invested firm Koi Trading, first met with Gensler in October of 2018 to offer him an advisory role — an offer he later rejected.
How Gensler’s Relationship With Binance Could Affect Lawsuit
If true, the latest revelation by the lawyers representing Binance could have a notable impact on the lawsuit with the SEC. Gensler’s former ties to Binance and Zhao potentially create a conflict of interest.
In fact, in the latest court filing, Binance demands Gensler’s recusal from any actions involving the exchange.
“Mr. Gensler should have been recused from any consideration in this matter based on this history and the prospect that Mr. Gensler may be a material fact witness,” Binance’s counsel wrote. “To date, the Staff has never confirmed whether Mr. Gensler has recused himself, and if he has not, the Commission’s explanation for why not.”
Binance’s legal team indicated that the SEC is yet to confirm if Gensler will be recused from the lawsuit. Still, according to CNBC, a spokesperson for the SEC said Gensler “is very familiar with and in full compliance with his ethical obligations, including any recusal obligations”.