Binance wants SEC chair Gary Gensler recused for ‘advising’ the crypto exchange

Court filings by crypto exchange Binance claim that Securities and Exchange Commission (SEC) chair Gary Gensler offered to serve as an “informal advisor,” and therefore should be recused in the SEC’s lawsuit.

In 2019, Gensler wasn’t yet the SEC chair but taught at MIT. According to a letter from Binance’s counsel, he sat down for lunch in March of that year with chief Changpeng Zhao (CZ) in Japan. During this meeting, the firm claims the pair discussed Binance opening an exchange in the US. The letter claims that Gensler offered to serve as an informal advisor during this meeting.

“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.”

The letter further claimed that Gensler gave CZ a sneak peek of his planned testimony before the House Financial Services Committee hearing in 2019, in which lawmakers discussed Facebook’s planned cryptocurrency Libra and wallet Calibra. In his statement, he urged for rules to be put in place “to guard against Calibra’s use of potential abuse of such customer funds.”

His testimony also stated that he doesn’t “advise any financial, technology, blockchain or other companies, nor do I own any cryptocurrencies.”

Read more: Explained: How Binance’s stablecoin BUSD can be a security

Furthermore, an investigation by the Wall Street Journal in March of this year suggests that Binance and Gensler’s relationship wasn’t quite as Binance describes. Internal company messages from 2019 show that the crypto exchange approached Gensler — not the other way around.

One Binance employee told colleagues that Gensler would be a useful advisor because he would likely be “back in a regulators seat if Dems win the 2020 election.” The head of Binance’s venture investing arm and another employee met Gensler in October 2018 and claimed that “Gensler declined advisor-ship.”

In a statement to CNBC regarding Binance’s allegations, the SEC said, “the Chair is very familiar with and in full compliance with his ethical obligations including any recusal obligations.”

The SEC and Binance’s next court appearance is scheduled for June 13, where the judge presiding over the case will hear about the SEC’s temporary restraining order to seize Binance’s assets.

Update 2023-06-08 5:25 PM: An earlier version of this piece said that Binance’s lawyers had claimed that Gensler approached the exchange, the piece has been updated to more accurately say that Binance’s lawyers want Gensler to recuse himself due to his previous offer to be an adviser.

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