The opposite of cronyism is retribution, and SEC Chairman Gary Gensler is showing us what that looks like making and example out of Binance.

June 12,2023

B​y: Bobby Casey, Managing Director GWP

Whenever someone suggests some aspect or all government is unnecessary, the righteous crabs in the bucket immediately start snipping away.

And they always mentioned the most noble purported functions too, so you can look like an even bigger jerk for blaspheming the precious system.

Next time your house is on fire, let’s see how much you hate the government!

Next time you need to use a road to get somewhere, we’ll see how anti-government you really are!

U​h huh. If the government was ONLY doing these things and even providing them modestly well, my attitude wouldn’t really resonate with many other people. I’d still say “taxation if theft”, but the frustration with government ineptitude and waste wouldn’t be there to foster the resentment as it is now.

Any time someone wants to keep something, they bring up its greatest hits reel. But the greatest hits are more like anomalies and flukes, than the rule. What exactly is the ratio of positive to negative actions? And are the few positives really worth the trouncing from the negatives?

T​he pearl clutching is the political histrionics of unimaginative people who really never bothered to consider that every service they get from the government could be and at one point probably was provided by the private sector.  We’ve been regulated out of self-sufficiency and basic free market practices.

Since 2012, regulations have gone up by nearly 34.7% in the US. That’s counting every occurrence where the words “must”, “cannot”, or “shall” in the rule book.

Here’s the thing, L. Gordon Crovitz did a piece for the WSJ covering Harvey Silverglate’s “Three Felonies a Day” book. In that article he says:

Under the English common law we inherited, a crime requires intent. This protection is disappearing in the U.S. As Mr. [Harvey] Silverglate writes, “Since the New Deal era, Congress has delegated to various administrative agencies the task of writing the regulations,” even as “Congress has demonstrated a growing dysfunction in crafting legislation that can in fact be understood.” Prosecutors identify defendants to go after instead of finding a law that was broken and figuring out who did it. Expect more such prosecutions as Washington adds regulations.

Lavrentiy Beria, the most ruthless and longest-serving secret police chief to Joseph Stalin, put it more concisely: Show me the person, and I’ll show you the crime.

T​hat’s not just how the laws are written, it’s how they are enforced. And we see the targeting happening from the feds.

Perhaps you remember the story of how Microsoft ended up getting a Washington DC office and lobbyists? Here’s a quick recap:

Microsoft didn’t want a lobby group in Washington DC. Political insiders at first found that to be naïve then they found it arrogant… and then they found it unpatriotic.

Around the same time, the Clinton Justice Department filed an antitrust suit against Microsoft, threatening massive fines, and even a breakup of the company.

Microsoft moved its government affairs office to Washington DC and hired a bunch of lobbyists. And suddenly the “break up” is off the table, and they are slapped on the wrist with a much lighter penalty.

There’s also the targeting of Matt Taibi by the IRS after the Twitter file dump. Or t​he targeting of James O’Keefe by the FBI when he came into possession of Ashley Biden’s diary.

Even Ron DeSantis stripping Disney of it’s privileged status in Florida over their disagreement with his policies, is a bad precedent.

Why? Because retribution is no better than cronyism. That’s why.

We’d covered how Binance found itself in the crosshairs of government regulators in April. They are in a battle with CFTC over futures and derivatives issues. While they have no headquarters, and therefore are not based in the US, the regulators are saying they must comply with US laws in order to do business with US persons.

Similarly, there is another battle happening with the SEC over their securities. And as that starts to unfold some facts are coming out in the whole discovery process having to do with one Gary Gensler. Gary is the chair of the SEC.

Depending on the article you’re reading, you will either see:

SEC Chair Gensler Offered to Serve as Binance Adviser in 2019, Lawyers Claim (Source: Decrypt)

O​R

Binance Once Tried to Hire SEC Chair Gary Gensler (Source: Fortune)

T​he former, and the others like it, are saying that Gensler was trying to get with Binance, offering his services as a regulatory adviser prior to taking the job with the SEC in 2021. He was a professor at MIT at the time.

T​he latter suggests that Binance sought Gensler out, but Gensler wasn’t interested… but not before having “several conversations with Binance executives and founder Changpeng Zhao”, including meeting Zhao in Japan for lunch.

Whether he was flatly rejected for the position, or it was mutual, it seems the now SEC Chair finds himself in a compromised position. Binance’s lawyers are calling for Gensler to recuse himself due to the nature of his history with Binance. That suggests the the rejection came from Binance, not Gensler.

Then there’s this little nugget that recently emerged:

• SEC Chair Gary Gensler is facing market manipulation accusations by Citadel Securities & Citadel Market Maker.

• He is alleged to have shorted crypto-focused stocks like AMC Theatres and GameStop via Vanguard Group and BlackRock.

• The allegations have sparked a Change.org petition demanding Gensler’s resignation for his failure to protect retail investors.

I’m having some issues giving ole Gary here the benefit of the doubt.  I can’t help but think Binance made the right choice, despite what they are up against.

W​e covered something similar ten years ago, talking about the revolving door between the SEC and Wall Street. That resulted in financial institutions getting away with things and receiving protections.

An investigation conducted by POGO (Projects on Government Oversight) through a Freedom of Information Act request found that 419 former SEC employees filed at least 1,949 disclosure statements indicating they planned to represent a private sector client with an SEC business. These disclosures are requisite in the first TWO years upon leaving the SEC.

This was just between 2001 and 2010. 419 former SEC employees filed nearly 2,000 disclosures.

So what happens when you cross someone who gets their hands on some regulatory power, and you didn’t give them the private sector gig?

Looks like they come for you. If “give me a name and I’ll tell you the crime” is the way, then Gary received the name Changpeng Zhao, and he’s telling us the alleged 13 charges against his company.

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