The Wall Street Journal published a long report in the early morning of the 6th, trying to emphasize Binance’s compliance issues in the United States to the outside world, alleging that Binance had made a plan when it established a US entity in 2019 to avoid being threatened by US regulatory authorities, suggesting that Binance.US is actually a “shield” for Binance to evade US supervision. The report also revealed that Binance had in the past thrown an olive branch to Gary Gensler, who was not yet the chairman of the US Securities and Exchange Commission (SEC) at the time, with the intention of recruiting him as an adviser.
There was an attempt to hire SEC Chairman Gary Gensler as an adviser
According to internal conversations obtained by The Wall Street Journal, Gary Gensler met with Ella Zhang, then head of Binance Ventures, and Harry Zhou, co-founder of Binance Investments’ Koi Trading while teaching at MIT in 2018. After Gary Gensler declined the advisory position, Harry Zhou wrote in the conversation
I observed that while Gensler declined to serve as an advisor, he was generous in sharing licensing strategies.
Binance, Binance.US Unusual relationship?
In addition to this, the Wall Street Journal report highlighted the relationship between Binance and Binance.US. Fearing regulatory scrutiny, Binance executives took steps years ago to mitigate risk, including the creation of a U.S. entity to attract enforcement and regulatory investigations, thereby shielding Binance from censorship.
According to internal conversation records obtained by the Wall Street Journal, a Binance executive told other employees in 2019 that any lawsuit filed by U.S. regulators against the company would definitely have a nuclear fall out impact on Binance’s business and employees, and that Binance had already developed countermeasures to avoid regulatory challenges.
For example, in a presentation titled “Separating Binance from U.S. Law Enforcement,” an employee suggested that Binance should establish a “pure contractual” relationship with entities in the U.S. and position it as a “separate business.”
In the past, Binance has repeatedly claimed that Binance.US is an independent entity focused on US users, and that Binance is limited to partnerships, and does not directly reach US users itself. As for whether there is a connection between Binance and Binance.US, this has been the focus of investigations by US regulators.
In response to the Wall Street Journal report, a Binance spokesperson responded
Binance.US was founded with an agreement with the Binance.com (Binance) technical team to establish the technical infrastructure and provide other forms of support for the new U.S. compliant exchange. This is a white label service that supports other exchanges. That’s why you’ll see that there are still some old communications between the members of these two organizations.
Binance pointed out that the exchange did not have adequate compliance and controls in the early days, but there are many changes to Binance when it comes to compliance.
At such a rapid pace, we made some mistakes that have now been corrected. After investing heavily in compliance talent, processes, and technology over the past two years, we are today a very different company when it comes to compliance.