Story highlights
- The Central Bank of Nigeria (CBN) criticized Binance for unauthorized deposits and withdrawal services, typically reserved for banks and licensed financial institutions.
- Binance and its executives face allegations of money laundering, foreign exchange contravention, and conspiracy to conceal financial proceeds, with the government highlighting transactions worth $35,400,000.
- The trial revealed that Binance facilitated peer-to-peer transactions involving naira without authorization, and concerns were raised about its impact on Nigeria’s exchange rate and compliance with regulations.
The Central Bank of Nigeria (CBN) has faulted the Binance cryptocurrency platform for carrying out deposits and withdrawal services meant for banks and other authorized financial institutions on its platform, without authorization.
Dr. Olubukola Akinwunmi, Head of Payment Policy and Regulation Division at the CBN, told Justice Emeka Nwite of the Federal High Court, Abuja on Friday that the deposits and withdrawal transactions done on Binance platform was what banks in Nigeria were authorized by the apex bank to do.
Nairametrics reports that the Nigerian government had accused Binance and its executives, Tygran Gambaryan and the fleeing Nadeem Anjarwalla, of allegedly conspiring amongst themselves to conceal the origin of the financial proceeds of their alleged unlawful activities in Nigeria, including $35,400, 000.
The Nigerian authorities allege they committed an offence contrary to Section 21 (a) and punishable under Section 18(3) of the Money Laundering (Prevention and Prohibition) Act, 2022.
What transpired during the trial
Led in evidence by counsel for the Economic and Financial Crimes Commission (EFCC), Ekele Iheanacho, the CBN staff told the court that the Binance website convinced many Nigerians to swiftly deposit and withdraw NGN or naira on Binance via a cash link.
He added that statements on the Binance website also stated it “does not charge deposit fees. For each withdrawal, a flat fee is paid by users to cover the transaction cost of moving the cryptocurrency out of their Binance account.”
He explained that “depositing and withdrawing naira is a regulated activity carried out by banks and other financial institutions duly licensed by Central Bank of Nigeria.”
He maintained that Binance was not given the authorization to carry out such transactions on its platform.
He also said that Binance facilitated conversion from naira to dollar, adding that that kind of service also required authorization by the CBN, either as an authorized giver or as a Bureau de Change.
He also told the court that traders who deal in foreign exchange on Binance “normally trade in pseudonyms” thereby hiding their identities in contravention of relevant laws.
The witness explained,
“The selling party will provide a bank account to which the buying party can send or transfer the naira amount into the account provided by the selling party.
“Once the buying party transfers the amount agreed, it clicks on a particular icon on the Binance platform to communicate the fact that he has transferred the amount.
“The Binance platform will on the side of the selling party, await confirmation based on which it will release the cryptocurrency or fiat currency.
“The Binance platform facilitated all these processes for the (naira)peer-to-peer transaction.”
After the witness’ examination, the court adjourned to July 16 for cross-examination by the defence.
Justice Nwite also ordered the Nigerian Correctional Services to produce the medical reports of the Tigran Gambaryan that day, warning the correctional service against non-compliance to the court’s directives.
He added that the medical practitioner at the prison service will have to appear in court if the medical report is not produced.
More insights
A director from the Securities and Exchange Commission (SEC) had told the court that the Binance platform became a reference point for determining Nigeria’s exchange rate.
SEC is a Federal Government agency that carries out registration of all capital market stakeholders, instruments to be traded on the market, and all the trading platforms.
In addition, the SEC makes rules and regulations on the capital market, conducts investigations, investigates enforcement as well as monitors the market.
Nairametrics reports that a popular method of buying and selling crypto is through Peer-to-peer, otherwise known as P2P.
The seller and buyer are connected in what can be likened to a marketplace.
Binance and its executives are faced with two separate suits by the FIRS and EFCC; the former bordering on tax evasion while the latter on money laundering and foreign exchange contravention.
Nairametrics recalls that the executives have also instituted a fundamental rights case against agencies of the Nigerian government, citing a violation of their constitutional right to liberty.
On February 28, Nigerian authorities detained two senior Binance executives, Nadeem Anjarwalla, a 37-year-old British-Kenyan who serves as the regional manager for Africa, and Tigran Gambaryan, a 39-year-old American who is the head of financial crime compliance at Binance.
Backstory
Recently, Nigeria’s National Security Adviser (NSA) classified cryptocurrency trading as a national security issue.
Following this, the Central Bank of Nigeria (CBN) directed four fintech startups operating in the country—Opay, Moniepoint, Paga, and Palmpay to block the accounts of customers engaging in cryptocurrency transactions and to report those transactions to law enforcement agencies.
Earlier in February this year, crypto trading platform, Binance, had to disable its peer-to-peer feature for Nigerian users as it came under the searchlight of the Nigerian government over allegations of currency manipulation and money laundering.
Meanwhile, SEC, during a virtual meeting with the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), called for a new cryptocurrency measure that aims to remove the naira as a currency pair from cryptocurrency peer-to-peer platforms.
The Acting Director General of the SEC, Dr. Emomotimi Agama, who made the call, emphasized the need to clean up the virtual assets space from illegal trading activities and safeguard the integrity of the Nigerian capital market.
Agama noted that the recent surge in peer-to-peer (P2P) crypto trading has reportedly impacted the Naira’s exchange rate, prompting the SEC to consider delisting the Naira from P2P platforms to curb market manipulation.
