Coinbase, Binance Hit Back After SEC Lawsuits


Coinbase CEO Brian Armstrong hits out at SEC chair Gary Gensler, while Binance alleges Gensler sought role at crypto exchange

The chairman of the US Securities and Exchange Commission (SEC) has been singled out by both Binance and Coinbase.

SEC chair Gary Gensler was criticised by Coinbase CEO Brian Armstrong, while Binance’s lawyers alleged that Gensler had offered to be an advisor to the crypto exchange in 2019.

The double attack after the SEC this week filed lawsuits against both Coinbase and Binance, as well as against Binance’s founder and CEO Changpeng Zhao.

Binance chief executive Changpeng Zhao. Image credit: Binance

Binance allegations

The SEC filed 13 charges against Binance and Zhao, alleging the company failed to register as an exchange and broker-dealer in the US, improperly commingled funds, and lacked critical internal controls over its businesses.

The SEC also applied for an emergency restraining order to freeze assets of Binance’s purportedly independent US Exchange.

But lawyers for both Binance and founder Changpeng Zhao hit back at SEC chair Gary Gensler on Wednesday.

CNBC reported that documents filed by the SEC indicate that attorneys from Gibson Dunn and Latham & Watkins, two of Binance’s law firms, allege that Gensler had offered to serve as an advisor to the crypto exchange in several March 2019 conversations with Binance executives and Zhao.

Gensler allegedly even met Zhao in Japan for lunch later that month, the filing claims.

According to CNBC, at the time, Gensler was teaching at Massachusetts Institute of Technology’s (MIT) Sloan School of Management.

Gensler was appointed head of the SEC in 2021 by President Biden, and over the past year has driven a crackdown in the US on the crypto sector.

Essentially, Binance lawyers are alleging that before Gensler started going after the crypto exchange, he was trying to cosy up to the company.

However CNBC noted that the Wall Street Journal had previously reported on Gensler and Binance’s relationship, citing internal Binance messages and a person close to the SEC chair. Both suggested that Binance had approached Gensler.

The Binance lawyers also allege that Gensler was slated to testify before the House Financial Services Committee in 2019 (over Facebook’s proposed and later cancelled cryptocurrency Libra and its planned Calibra wallet), and he sent Zhao a copy of his intended testimony ahead of the hearing.

Coinbase response

Meanwhile Reuters also reported that Coinbase chief executive Brian Armstrong hit back at SEC Chair Gary Gensler on Wednesday over the agency’s lawsuit against the crypto exchange,

Armstrong reportedly called Gensler an “outlier,” but also reassured customers that their funds were safe.

The SEC on Tuesday had alleged Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.

The financial regulator also said Coinbase was operating as an unregistered exchange, broker and clearinghouse.

Reuters reported that Coinbase’s Armstrong is an outspoken critic of the SEC. Armstrong reportedly said at a Bloomberg conference that the company had approached the regulator about becoming registered, but received an “icy reception” from Gensler at their first meeting.

“The SEC chair is really an outlier,” Armstrong was quoted by Reuters as saying, adding that several lawmakers he had talked to were supportive of developing a clear regulatory framework.

Speaking to Reuters late on Tuesday, Paul Grewal, the company’s chief legal officer, also said he was “confident” the SEC would not try to freeze Coinbase’s assets, as it has done in the case of Binance. “The standards that are required for such an asset seizure simply don’t apply in our case,” he said.

Armstrong co-founded Coinbase in 2012 after a stint as a software engineer at Airbnb, Reuters reported.

Armstrong has previously taken aim at the SEC.

In 2021, he accused the agency in a series of tweets of “really sketchy behaviour” after it warned Coinbase it would sue the company if it went ahead with a planned lending program. Coinbase subsequently pulled the product.