Recent developments have emerged following lawsuits by the Securities and Exchange Commission (SEC) against two of the world’s leading cryptocurrency exchanges.
On June 5, the SEC filed a comprehensive lawsuit accusing Binance of mismanagement of client funds and misleading regulators and investors about its activities. The following day, the SEC issued allegations against Coinbase for allegedly operating as an unregistered stockbroker, unregistered exchange, and unregistered clearing house.
Now, additional aspects of the Binance lawsuit have emerged, including claims of Binance’s deceptive practices and allegations against SEC Chairman Gary Gensler.
US senators accuse Binance of lying
According to a message dated June 8 Bloomberg report, Senators Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-Md) wrote a letter to U.S. Attorney General Merrick Garland, indicating that Binance may have presented inaccurate information about its business practices. This misinformation, they claim, revolves around the independence of its subsidiary, Binance.US, which Binance claims is a separate entity.
In the letter, they wrote: “Binance and its related entities have purposefully evaded regulators, turned over assets to criminals and sanctions evaders, and hidden basic financial information from its clients and the public.”
“While [Binance CEO Changpeng Zhao] has claimed that Binance.US is a ‘fully independent entity’, but in reality it controls the company as a ‘de facto subsidiary’ of Binance,” the letter continued.
Earlier in March, the senators had also issued a bipartisan call for Binance to provide transparency on potentially “illegal trading practices”.
Binance has not responded to these allegations.
Binance’s legal team alleges former ties to Gensler
In addition to the letter from Senators Warren and Van Hollen, another development in the Binance story is making Web3 headlines. According to a June 7 filing by Zhao and his attorneys, Gensler offered to serve as an informal advisor to Binance in 2019.
Gibson Dunn and Latham & Watkins, two law firms representing Binance, allege in the filing that Gensler was willing to advise the cryptocurrency exchange during multiple conversations with Binance and Zhao executives in March 2019. These documents further allege that Gensler met with Zhao for a lunch in Japan later that month. The two kept in touch, and “Zhao understood that the current chairman felt comfortable serving as an informal adviser,” the filing said.
Two years later, in 2021, Gensler was appointed head of the SEC.
WSJ reported in March that Binance approached Gensler for an advisory role
Binance lawyers say in a filing today that Gensler approached them in 2019
It is really important that we get clarity on this as soon as possible.
— Frank Chaparro (@fintechfrank) June 8, 2023
I’m impressed that Gary Gensler took @cz_binance rejecting him so personally that he quit crypto and became the SEC chairman solely to get revenge
That’s dedication
— borovik.eth (@3orovik) June 8, 2023
Given Gensler’s relationship and history with Zhao, Binance’s legal team has demanded his removal from all matters related to the company.
“Mr. Gensler should have been excluded from any consideration in this matter based on this history and the prospect that Mr. Gensler could be a material witness,” Binance’s counsel wrote. Mr Gensler has withdrawn, and if not, the Commission’s statement as to why.”
They claim SEC personnel have not confirmed their request.