Gensler Allegedly Offered to Serve as an “Informal Advisor,” Binance Claims

Binance, one of the world’s largest cryptocurrency exchanges, is being sued by the United States Securities and Exchange Commission (SEC) over regulatory ambiguity. Binance’s lawyers believe that SEC Chair Gary Gensler should recuse himself from the lawsuit because of his former ties with the exchange. This incident calls into question the SEC’s neutrality in its dealings with Binance.

The Gensler-Binance Connection

According to Binance’s lawyers, a meeting between Binance CEO Changpeng “CZ” Zhao and Gary Gensler, who was not yet SEC Chair at the time, took place in March 2019. The meeting, held in Japan, focused on Binance’s BNB coin and the exchange’s aspirations to establish a presence in the United States. Following the discussion, Gensler announced his desire to act as an informal counsellor to Binance, establishing a professional relationship between the two sides.

The Recusal Debate: Should Gensler Step Aside?

Binance’s legal team contends that, given Gensler’s previous involvement with Binance, the SEC Chair should recuse himself from the case. They contend that Gensler’s participation as a significant fact witness jeopardizes his capacity to oversee the proceedings impartially. The SEC, on the other hand, has not confirmed whether Gensler has recused himself, leaving the subject unsolved and increasing worries about potential conflicts of interest within the regulatory body.

Gensler’s Testimony and Email Exchange

According to the lawyers’ letter to the SEC, Gensler had scheduled testimony before the House Financial Services Committee in 2019. Prior to the hearing, he sought assistance from CZ Zhao by sharing a draught of his prepared statement. This disclosure complicates the picture further by implying a higher level of involvement and engagement between Gensler and Binance.

SEC’s Response and the Freeze of Binance.US Assets

In response to the SEC’s complaint against Binance, the SEC requested a temporary restraining order freezing any assets stored on Binance.US, the exchange’s US-based platform. The restraining order hearing is planned for June 13, adding to the excitement and speculation about the potential consequences for Binance and its operations.

The Petition of Coinbase and the Request for Rulemaking

On June 14, the SEC will be served with a court order requiring a response to a petition filed by Coinbase. The petition requests clarification on whether the SEC intends to participate in cryptocurrency-specific rulemaking. This development suggests a broader interest in building regulating frameworks for the crypto business, which could influence the result of the Binance case and the regulatory landscape for digital assets.