Imprisoned execs, brave escapes: How Binance’s $35 million battle with Nigeria unfolded

Binance's operations in Africa's largest cryptocurrency market are under intense scrutiny, with Nigerian authorities accusing the crypto giant and other exchanges of numerous other violations, including facilitating illegal money transfers.

One Binance executive is in prison in Nigeria and another has left the country after being arrested, and Nigerian authorities have singled out the exchange for violating Nigerian laws and tax evasion.

According to court papers shared with Decrypt, Nigerian authorities allege that Binance, along with its Africa regional head, Nadeem Anjarwala, and financial crimes suspect Tigran Gambarian, “carried on the exclusive business of another financial institution without a legal authorization (sic).”

They were also accused of manipulating the forex market by concealing the “source of income of your illegal activities” and “the origination of the sum of $35,400,000”.

‘Blackmail'

In February, Binance sent Gambarian and Anjarwala to Nigeria's capital, Abuja, to conduct an investigation into crypto exchanges with top government officials. As part of the investigation, Nigeria has asked Binance to provide information on the top 100 users in the country, including their trading history for the past six months.

The officials were arrested on February 28 at the behest of the quiet but hawkish National Security Adviser Nuhu Ribadu, a retired police officer and head of the country's anti-corruption agency. According to the court's decision, no charges were filed against the couple, who were detained by the Economic and Financial Crimes Commission for 14 days.

On March 22, Anjarwala, a British Kenyan, escaped from custody after being allowed to visit a local mosque for prayers under guard. According to local media, he used a hidden passport to flee the country to an unknown location. Nigeria is said to be working with INTERPOL to repatriate Anjarwala.

On the same day, the FIRS also filed a tax evasion case against Anjarwala and Gambian. On March 28, the EFCC charged Binance, Anjarwalla and Gammbaryan with money laundering.

Gambarian, an American citizen, remains in custody and has sued the Nigerian government for illegal detention. He was arraigned in court yesterday, and no plea was entered; He will be formally arraigned on the money laundering charge on April 8 and the tax evasion charge on April 19, when the plea is filed.

Nigeria's EFCC has indicated that Gambarian may be prosecuted on behalf of the money exchange. The family said they were concerned that the Binance official was using them as leverage for Nigerian authorities to punish the employer.

“Simply put, my husband was caught as a black crime,” said his wife, Yuki.

In the statement, Binance insisted that Gambaryan has not violated any Nigerian law and has no decision-making authority in the company.

Gambarian is awaiting trial at the Federal High Court in Abuja, along with Binance and Anjarwalla, in his lawsuit against the Nigerian government, alleging violation of his constitutional rights.

“The prison will damage Nigeria's reputation,” said Seyi Ayojulugbe, a senior analyst at SBM Intelligence, a Lagos-based risk consultancy.

The CEO of a Nigerian peer-to-peer cryptocurrency marketplace has dismissed as “rubbish” allegations that cryptocurrency exchanges are used for money laundering and terror financing. “There are smart people who know that most of the illegal activity in government is done with fiat, the traditional banking system and cash dollars,” said Ray Youssef, CEO of Noones.

Binance and Nigeria

Navigating the gray areas of controversy and regulation is a priority for the company's new CEO, Richard Teng. He replaced Binance founder Changpeng Zhao as CEO after Zhao resigned from the company last November amid a $4.3 billion money laundering case in the United States.

“Over the past two years, Binance has worked strategically to address past compliance issues through continuous efforts to recruit, hire and retain the right professionals to strengthen Binance's compliance program and culture,” Teng said days after the success. Zhao in November 2023.

But the changes at the top of Binance don't seem to have flattered the Nigerian authorities.

In February, Nigeria's central bank governor, Olami Cardoso, told reporters that in one year, $26 billion had passed through Nigeria from unidentified sources.

“We are concerned that certain practices that indicate illegal flows and suspicious flows are continuing in a number of these entities,” Cardoso said.

Globally, at least $24.2 billion will be found in illegal cryptocurrency addresses by 2023, according to Chinalysis, an international cryptocurrency analysis firm. But he warned the figure could be higher.

In March, Bio Onanuga, a spokesman for Nigerian President Bola Tinuaga, said Binance's operations had harmed the country's economy and blamed the crypto giant for weakening the local currency, the naira.

Binance has denied any wrongdoing, but announced in March that it was suspending all naira-denominated services.

The country's Federal Inland Revenue Service (FIRS) slapped four tax evasion charges against cryptocurrency exchanges last month. The tax agency said the company helped its Nigerian beneficiaries evade taxes.

“One of the allegations in the lawsuit concerns whether Binance collected and remitted various categories of tax to the federation,” FIRS said, as provided for in section 40 of the FIRS Establishment Act of 2007, as amended.

Section 40 of the Act clearly states that non-deduction and non-payment of taxes, fines and imprisonment are imposed on the guilty parties.

In addition, Binance failed to pay value added tax and company income tax and was accused of failing to comply with tax return filing obligations.

Nigeria and cryptocurrency

The Binance issue highlights Nigeria's problems with cryptocurrency.

In May 2023, former Nigerian President Muhammadu Buhari signed the 2023 Finance Bill into law. The law introduces sweeping changes to the country's revenue generator, including a 10% capital gains tax on gains on disposal of digital assets from May 1, 2023.

The country also released a national policy to drive blockchain adoption in the same month.

The policy document explains that the National Blockchain Policy provides for the use of cryptocurrencies to help prevent risks such as money laundering and fraud, among others. This will help build trust in cryptocurrency and make it more accessible to businesses and individuals in Nigeria.

The feeling at the time was that the crypto-crazy nation was slowly moving toward official recognition of cryptocurrency.

Months before the release of the financial law and policy document, President Bola Tinuyi campaigned for the election promising a deregulated environment for trading digital assets.

Almost six months after taking power, the country lifted a ban on banks trading in digital assets. In less than three months, a more aggressive crackdown on cryptocurrency exchanges began.

The Central Bank of Nigeria's (CBN) order prohibiting banks from allowing crypto transactions was signed into law when Tinubu made his campaign promise.

CBN in 2011 It ordered the closure of all accounts linked to cryptocurrency exchanges by 2021, fearing that pseudo-anonymous crypto accounts could encourage money laundering and terrorist financing.

Although the Nigerian government is still keen to allow crypto exchanges to register, new entrants must pay hefty registration and operational fees. New anti-money laundering regulations for digital asset operators have been introduced by the Securities and Exchange Commission (SEC).

The SEC itself has consistently warned that cryptocurrencies are a risky business.

“Nigerian investors are warned that investing in crypto-assets is extremely risky and may result in the loss of their entire investment,” the SEC said in a June 2023 circular.

Experts have argued that Nigeria's foreign exchange crisis has nothing to do with reckless spending and cryptocurrency trading.

“Although the government tends to blame external factors such as kriptovalyutnoy trade, the root causes of Nigeria's foreign exchange challenges lie in irresponsible government spending, oil theft and low levels of export earnings – for which the government bears major responsibility,” Awojulugbe said.

Binance responds

The crackdown on Binance comes months after bureau de change operators called for a ban on the crypto giant.

“So we have to do something that can stop Binance. It's competition; we have to stop Binance, and the only way to do that is if you have liquidity,” Aminu Gwadebe, head of the Association of Bitcoin Exchange Operators of Nigeria (ABCON), told the state-owned news agency in August.

Despite mounting legal challenges and lawsuits in Nigeria, Binance remains steadfast in its response. The cryptocurrency exchange has denied any wrongdoing, stressing its commitment to complying with regulations in all jurisdictions where it operates.

Bradley Jaffe, Binance's chief strategy officer, did not immediately respond to Decrypt's request for comment. But in a blog post in March, the company responded to allegations of tax evasion and illegal activities in Nigeria, saying it would fully cooperate with authorities and vigorously defend the allegations.

In an April blog post, Binance added that discussions are ongoing between the company and Nigerian government officials regarding the Gambian arrest.