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Senators Accuse Binance of Lying, Gensler’s History With the Exchange Raises Eyebrows

BY Erika Lee

June 08, 2023

Recent developments have emerged following lawsuits by the Securities and Exchange Commission (SEC) against two of the globe’s leading cryptocurrency exchanges.

On June 5, the SEC filed a comprehensive lawsuit accusing Binance of mismanagement of customer funds and deception towards regulators and investors about its operations. The next day, the SEC leveled allegations against Coinbase for allegedly operating as an unregistered broker of securities, an unregistered exchange, and an unregistered clearing agency.

Now, additional aspects of the Binance lawsuit have emerged, encompassing claims of deceptive practices from Binance and allegations aimed at SEC Chair Gary Gensler.

U.S. Senators accuse Binance of lying

According to a June 8 Bloomberg report, Senators Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-Md) penned a letter to U.S. Attorney General Merrick Garland, indicating that Binance may have presented inaccurate information about its business practices. This misinformation, they allege, revolves around the independence of its affiliate, Binance.US, which Binance has claimed to be a distinct entity.

In the letter, they wrote, “Binance and its related entities have purposefully evaded regulators, moved assets to criminals and sanctions evaders, and hidden basic financial information from its customers and the public.”

“While [Binance CEO Changpeng Zhao] has claimed that Binance.US, is a ‘fully independent entity,’ in reality, he controls the company as a ‘de facto subsidiary’ of Binance,” the letter continued.

Previously in March, the senators had also led a bipartisan call for Binance to provide transparency about potentially “illegal business practices.”

Binance has not responded to these allegations.

In addition to Senators Warren and Van Hollen’s letter, 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 for Binance in 2019.

Gibson Dunn and Latham & Watkins, two law firms representing Binance, allege in the filing that Gensler expressed a willingness to advise the cryptocurrency exchange during multiple discussions with Binance executives and Zhao in March 2019. These documents further claim that Gensler met Zhao for a luncheon in Japan later that month. The two remained in touch, and “Zhao understood that the now-Chairman was comfortable serving as an informal advisor,” according to the filing.

Two years later, in 2021, Gensler was appointed the head of the SEC.

Given Gensler’s relationship and history with Zhao, Binance’s legal team has demanded his removal from any matters concerning the company.

“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.”

They assert that the SEC staff has not acknowledged their request.

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