Binance, Others Face Billions Of Dollars In Fines in Nigeria Over Alleged Currency Manipulation

Nigeria’s Securities and Exchange Commission (SEC) may slam huge fines running into billions of dollars on one of the world’s biggest exchanges, Binance, and other cryptocurrency firms operating in the country, THISDAY gathered on Wednesday.

SEC, alongside other security operatives is currently probing allegations that the crypto companies had engaged in currency manipulations activities against the Naira without underlying transactions, a development which had contributed to the current FX liquidity crisis in the country.

Binance has previously been sanctioned by the US Government for repeatedly engaging in currency manipulation.

Following the crackdown by the federal government, the company on Wednesday reportedly suspended its operation and barred users from buying the USDT and USDC stablecoins with Naira following fresh investigations by the Central Bank of Nigeria (CBN) in collaboration with security agencies.

A report by Financial Times alleged that security operatives had cracked down and detained two Binance executives, including an American and a British-Pakistani, following an invitation for a meeting with officials from the Office of the National Security Adviser (NSA).

Two high-ranking officials of the exchange, who recently arrived in the country, were arrested and subsequently detained while their passports were also seized, according to the UK-based news outlet.

It was further gathered that during their interrogation by the NSA, the Binance executives were requested to provide data about their naira operations covering seven years back.

The federal government also demanded that they delete naira information from their platform, a request that the Binance executives reportedly declined.

It was also reported that the federal government might have obtained a court warrant to detain both Binance officials for at least 12 days to facilitate further probe into their suspected malicious operations in the country as well as uncover their collaborators.

The crackdown on Binance followed ongoing investigations into the country’s foreign exchange market, which had reportedly endured years of distortions, manipulations, and speculations, leading to the continuous weakening of the naira against major currencies, particularly the US dollar, in recent times.

Speaking at the just concluded meeting of the Monetary Policy Committee (MPC), CBN Governor, Mr. Olayemi Cardoso, justified the bank’s recent clampdown on cryptocurrency platforms, particularly Binance, which he said allowed its platform to be used for speculative activities against the naira.

Cardoso explained that unidentified users accessed $26 billion on the platform in 2023 with all the attendant implications for monetary policy, especially the tendency to stoke inflation and make the naira further vulnerable.

He said there were also indications of illicit inflows and suspicious transactions, adding that the CBN has the responsibility to protect Nigerians from the disruptive activities of such crypto platforms.

The CBN governor stated that the apex bank was collaborating with different agencies, including the Economic and Financial Crimes Commission (EFCC), police, the Office of the NSA to crack down on the alleged economic saboteurs.

Cardoso said, “We are concerned that certain practices go on that indicate illicit flows going through a number of these entities and suspicious flows.

“In the case of Binance, in the last year alone, $26 billion has passed through Binance Nigeria from sources and users who we cannot adequately identify.

“There is a lot that is going on now as a result of collaboration between the different agencies, which includes the EFCC and the police, and, of course, the Office of the NSA and in due course, as we progress and have more information to share, we will certainly share, but suffice to say that we are determined to do everything it takes to ensure that we take charge of our market and do not allow others to manipulate our markets in a way that ends up distortionary.

“We will not accept it. And we will do everything possible to prevent any of these kinds of infractions from taking place.”

However, analysts warned that the crackdown could send mixed signals to foreign investors and further cause their confidence in the economy to plummet.

Referring to the exercise as a “terrible mistake” capable of chasing investors away, the analysts said the operation would have been carried out discreetly without public attention.

An online news platform, TechCabal, quoting someone privy to the meeting with Binance officials wrote, “There was a meeting of crypto founders on Tuesday morning, and a number of them agreed to suspend the trades on their platform.”

At least two crypto exchanges relayed the troubling development to their customers.

A notification by one of the exchanges to customers read, “We are suspending the buying and selling of USDT and USDC for Naira. This means you can’t buy or sell USDT or USDC with naira.”

James Emejo and Nume Ekeghe