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Binance tried to hire Gary Gensler in 2018 for closer ties with US regulators: report

BusinessCryptoBinance 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 advisor before he became chairman of the United States Securities and Exchange Commission. According The Wall Street Journal reports based on messages and documents from 2018 and 2020, as well as interviews with former employees.

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

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 declined the advisory position, Zhou wrote in the chat:

“I see that Gensler declined advisor-ship, but he was generous in sharing licensing strategies.”

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According to a Binance employee, Gensler “could be back in a regulatory seat” if the Dems win the 2020 election. The second meeting took place in Tokyo in March 2019 between Gensler and Binance founder Changpeng “CZ” Zhao. Gensler became SEC chairman in April 2021.

According to the newspaper, Gensler was approached by several private companies to work as a consultant at MIT, but declined all offers.

The report highlights the relationship between Binance and its American branch, Binance.US. Fearing regulatory scrutiny, exchange executives took steps several years ago to mitigate risk, including setting up a US entity that would attract enforcement and regulatory inquiries, thereby shielding Binance from regulatory oversight.

In a presentation titled “Insulating Binance from US Enforcement,” the staff suggested that Binance should have a “purely contractual” relationship with the US entity, setting it up as a separate operation.

A spokesperson for Binance told Cointelegraph:

“When Binance.US was established, there was an agreement with the Binance.com tech team to build technical infrastructure and provide other types 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 crypto exchange also noted that Binance and Binance.US “shared the same ultimate beneficial owner,” a fact known to the public since inception. “Binance.US however recently went through a funding round, whereas Binance.com has not.”

Binance further noted that it does not have any US customers, and the companies are separate legal entities. The exchange also acknowledged past “missteps” during its expansion:

“While growing at such a rapid pace, we made some initial mistakes which have now been rectified. After massive investments in compliance talent, processes and technology over the past two years, we are a very different company today when it comes to compliance.

Binance is reportedly Preparing to face fines and penalties To settle outstanding regulatory and law-enforcement investigations in the United States. Patrick Hillman, chief strategy officer at Binance, said the firm is working with regulators to resolve past compliance issues. According to the company, the compliance and investigation workforce grew by 500% last year.

Update (March 5th, 9:22PM UTC): This article has been updated to include Binance’s response.