Binance allegedly tried to evade US authorities, while offering Gensler advisory role

A recent report revealed that crypto exchange Binance allegedly maintained control over its American unit, which was said to operate independently from the international entity. Moreover, Binance reportedly courted Gary Gensler to be an adviser for the company long before Gensler became chairman of the US Securities and Exchange Commission (SEC). 

A Wall Street Journal report citing messages, documents, and statements from former Binance employees, claims that the relationship between Binance and Binance.US was more linked than both businesses disclosed, adding that “Binance developers in China maintained the software code supporting Binance.US users’ digital wallets, potentially giving Binance access to U.S. customer data.”

According to the WSJ, Binance was concerned about not getting into trouble with US regulators, and sought to create a business in the United States that would shield it from their scrutiny.

Harry Zhou, who worked for a bitcoin trading company financed by Binance, was the individual who suggested the creation of a separate entity to operate in the US, according to the report. 

BAM Trading Services was set up in February 2019, along with other BAM companies, while Binance.US was unveiled through a partnership between Binance and BAM Trading Service in June 2019. However, the WSJ stated that documents showed that Binance CEO Changpeng Zhao, also known as “CZ”, had control over all the BAM businesses, an information that was supposedly undisclosed.

‘The strategy centered on building a bare-bones American platform, Binance.US, that would license Binance’s technology and brand but otherwise appear to be wholly independent of Binance.com. It would shield from US regulators’ scrutiny of the larger Binance.com exchange, which would exclude U.S. users.”

The strategy centered on building a bare-bones American platform, Binance.US, that would license Binance’s technology and brand but otherwise appear to be wholly independent of Binance.com. It would shield from U.S. regulators’ scrutiny of the larger Binance.com exchange, which would exclude U.S. users.”

Wall Street Journal

Although Binance announced that it would stop servicing US customers, a Telegram chat reviewed by the newspaper revealed that American customers accounted for 18% of page views on the international company’s website, with one of Binance’s executive suggesting in the chat that US clients could use virtual private network (VPN) in order to continue trading on the Binance platform. 

Also, Catherine Coley, the first CEO of Binance.US, claimed that the business was independent of Binance, but later told staff in a Telegram chat to send her progress updates in order for her to forward them to CZ and Binance’s ex-chief financial officer, Wei Zhou. 

Binance sought out SEC’s Gary Gensler as Adviser

The WSJ report also revealed that Binance tried to ask Gary Gensler to become an adviser for the company, long before Gensler became SEC chairman. The offer came when Gensler was teaching at the Massachusetts Institute of Technology (MIT) between 2018 and 2021. 

Binance reportedly made a couple of advances, first in 2018 with Ella Zhong — who previously headed Binance’s venture investing unit — and Harry Zhou, meeting with Gensler in Oct. 2018, and in 2019 when the SEC chief met with CZ in Tokyo. While Gensler declined the offer, Harry Zhou said “he was generous in sharing license strategies.”

Meanwhile, the latest revelations come as Binance continues to be the subject of intense regulatory scrutiny, especially from American watchdogs. As previously reported by crypto.news, a Binance executive said that the company is ready to pay fines and penalties in order to resolve regulatory investigations in the US. Also, a group of bipartisan US senators initiated a probe against Binance, alleging that the firm deliberately evaded regulators and hid “basic financial information from its users and the general public.”