Nigeria’s anti-graft agency, the Economic and Financial Crimes Commission (EFCC), has secured an order from the Federal High Court to freeze N548.6 million in bank accounts belonging to suspected crypto users on platforms like ByBit, KuCoin, and others, based on their alleged role in naira fluctuations.
The motion, dated September 3, 2024, which the court relied on to freeze the funds, casts a fresh spotlight on major foreign crypto platforms, ByBit and KuCoin, accusing them of aiding the devaluation of the Nigerian currency.
This development is part of a broader prosecutorial and legal campaign by federal government agencies to address alleged foreign exchange violations and tax evasion by foreign cryptocurrency platforms.
Naira fluctuation allegations:
Recall that in February 2024, Nigeria’s security agency arrested two executives of the Binance cryptocurrency platform following intelligence from the National Security Adviser, which alleged money laundering and terrorism financing activities on certain cryptocurrency exchange platforms..
Recall that the EFCC is already in court against Binance and Tigran Gambaryan over money laundering offenses involving $35.4 million.
This recent motion now extends the indictment to ByBit and KuCoin, accusing them and several unnamed crypto platforms of enabling their Nigerian users to engage in ”price discovery, confirmation, and market manipulation” through their platforms, thereby causing “distortions in the market, resulting in the naira losing its value against other currencies.”
An EFCC investigator, Okoro Philip, stated in his affidavit, exclusively seen by Nairametrics, that over the past few months, Nigeria experienced considerable gains in currency stabilization efforts by the Federal Government, as evidenced by the dollar trading at N980 to $1 on the black market.
He added that these gains were swiftly reversed on Thursday, April 18, 2024, when the dollar surged from N1,250 to $1 on the parallel market.
He said further investigation and intelligence indicated that “these fluctuations were primarily driven by activities on platforms such as ByBit, KuCoin, and other similar cryptocurrency platforms.”
He stated that 22 bank accounts, domiciled in various Nigerian banks and described in the motion, belong to willing sellers of USDT, who provide their naira accounts to transfer the naira equivalent of the USDT.
He contended that the identified account holders are users of ByBit, KuCoin, and other foreign cryptocurrency platforms, who are not authorized to deal in foreign exchange, advertise, negotiate, or carry out cryptocurrency exchanges to naira and vice versa at rates detrimental to Nigeria’s financial system.
The prosecution accused the cryptocurrency platforms of deliberately ignoring the mandatory requirements under Nigeria’s anti-money laundering laws and regulations, enabling users of the platforms to operate under a cover of secrecy.
“ByBit is a cryptocurrency platform where the exchange of USDT (a digital dollar) to other currencies, including the naira, takes place. One USDT is approximately equivalent to one United States dollar (USD). The exchange rates determined by users of these cryptocurrencies adversely affect the value of the naira by artificially lowering its value.
“The proceeds of this manipulation go into the account of the willing seller,” the official added in the case marked FHC/ABJ/CS/543/2024.
More Insights:
The EFCC alleged that further intelligence has revealed that the proceeds of crimes and funds for terrorist activities are covertly exchanged through these platforms.
The Commission disclosed it has written to all the banks where the accounts are domiciled, requesting hard copies of the identified account details, a directive which has been complied with.
EFCC counsel, Ekele Iheanacho, urged the court to freeze the bank accounts listed in its schedule, which belong to various individuals, some of whom are either currently being prosecuted or investigated for unauthorized foreign exchange dealings, money laundering, and terrorism financing, pending the conclusion of the investigation and prosecution.
The identified accounts include those of Kora Payment Network, AD Ishola Farms Ltd, and Microcore Tech Investment Services.
The motion was moved in open court by Iheanacho on September 4, 2024, and granted by Justice Emeka Nwite.
What you should know:
This latest development follows a court order freezing 1,146 accounts for 90 days (from April 25, 2024, to July 23, 2024) over illegal financial transactions.
An affected party later applied to have several of the freezing orders lifted, and the court granted the request.
However, the EFCC brought in a fresh motion to continue its investigation, having filed criminal charges against some of the operators of the accounts.
ByBit remains one of the few cryptocurrency exchanges still offering a peer-to-peer section on its platform, following a crackdown on other exchanges like Binance, which led to the delisting of their peer-to-peer categories.
ByBit also offers options for crypto trading on its platform and is a favorite among Nigerian crypto traders. Nigeria’s National Security Adviser (NSA) recently classified crypto trading as a national security issue.
This led to the Central Bank of Nigeria (CBN) ordering five fintech companies, including OPay, Palmpay, Moniepoint, Kuda, and Paga, to stop onboarding new customers.
In response, these fintech companies have announced the prohibition of cryptocurrency or virtual currency transactions on their platforms.
Under CBN supervision, the fintech companies are now required to report any account trading in cryptocurrency to the NSA through their regulator, the CBN.
KuCoin’s VAT charge comes amid the Nigerian government’s clampdown on cryptocurrency exchanges and related transactions, which saw Binance exit the market.
This crackdown also forced Binance and KuCoin to halt NGN/USD P2P trading on their platforms.
