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ExchangeRegulation 3 min

Nigerian Central Bank Accuses Binance of Unauthorized Transactions

Tigran Gambaryan, Binance’s head of financial crime compliance, has entered a not guilty plea to allegations of money laundering in a Nigerian high court. Despite Binance’s assertion that Gambaryan lacks decision-making authority within the company, the presiding judge has determined he represents the company under Nigerian law, further complicating the case. A Case of High Stakes In February, Nigerian authorities detained Gambaryan and colleague Nadeem Anjarwalla, accusing Binance of facilitating the processing of illegal funds worth billions and manipulating the Nigerian naira’s exchange rate. While Anjarwalla managed to escape custody in March, the saga took a more severe turn as both executives sued the Nigerian government, claiming a breach of human rights. Charges and Controversies The accusations level against Gambaryan and Anjarwalla by Nigeria’s Federal Inland Revenue Service (FIRS) and the Economic and Financial Crimes Commission (EFCC) include tax evasion and money laundering, spotlighting the intense scrutiny crypto exchanges face regarding regulatory compliance. Despite Binance’s defense highlighting Gambaryan’s limited role in the company’s decision-making processes, Justice Emeka Nwite has maintained that the executives’ past interactions with Nigerian officials regarding Binance’s operations render them suitable representatives of the firm in this legal battle. The Plea and the Path Forward Gambaryan’s not guilty plea encompasses five charges, notably including the unlawful negotiation of foreign exchange rates in Nigeria, a serious offense under the country’s Foreign Exchange (Monitoring And Miscellaneous Provisions) Act. As Gambaryan remains in custody pending trial, with the opportunity for bail open until April 18, the case against him and by extension, Binance, underscores the broader challenges facing the cryptocurrency industry in navigating the complex landscape of international finance laws and regulations.

The Central Bank of Nigeria (CBN) has accused cryptocurrency exchange Binance of performing unauthorized banking services. The allegations were presented in court on July 5, where a central bank official testified about Binance’s lack of necessary licenses and regulatory approval.

Unauthorized Banking Activities

Olubukola Akinwunmi, head of payment policy and regulation at the CBN, testified before Judge Emeka Nwite of the Federal High Court of Nigeria in Abuja. He claimed that Binance conducted deposit and withdrawal transactions, activities typically reserved for banks and authorized financial institutions.

Unlicensed Currency Conversion Allegations

The Nigerian government has accused Binance and its executives, Tigran Gambaryan and Nadeem Anjarwalla, of attempting to obscure the origins of $35.4 million in financial proceeds from illegal activities in Nigeria. During the trial, Akinwunmi, led by counsel for the Economic and Financial Crimes Commission, Ekele Iheanacho, stated that Binance’s website misled Nigerians into using its platform for naira transactions via a cash link. The platform promoted fee-free deposits and flat-fee withdrawals, activities regulated by the CBN and reserved for licensed banks and financial institutions.

Akinwunmi further alleged that Binance facilitated currency conversions from naira to U.S. dollars without proper authorization from the CBN. He highlighted that traders on Binance often use pseudonyms, which contravenes laws requiring the disclosure of true identities in financial transactions.

Unauthorized Peer-to-Peer Transactions

Akinwunmi detailed the peer-to-peer transaction process on Binance, where the buying party transfers naira to the selling party’s bank account and confirms the transaction on the platform. This action prompts Binance to release the cryptocurrency or fiat currency. Akinwunmi argued that this service is a regulated activity that Binance was not authorized to perform.

Also Read: Nigerian Student Returns $14,000, Mistakenly Sent Solana Tokens

Court Proceedings and Broader Crackdown

After Akinwunmi’s testimony, the court adjourned until July 16 for the defense’s cross-examination. Judge Nwite also ordered the Nigerian Correctional Services to produce Tigran Gambaryan’s medical reports, warning of consequences for noncompliance.

This legal action against Binance is part of a broader crackdown on cryptocurrency activities in Nigeria. The National Security Adviser recently classified cryptocurrency trading as a national security issue. The CBN directed fintech startups like Opay, Moniepoint, Paga, and Palmpay to block and report accounts engaging in cryptocurrency transactions.

In response to increased government scrutiny, Binance disabled its peer-to-peer feature for Nigerian users in February. Additionally, during a virtual meeting with the Blockchain Industry Coordinating Committee of Nigeria, the Securities and Exchange Commission (SEC) called for measures to delist the naira from P2P platforms to curb market manipulation and protect the integrity of Nigeria’s capital market.

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