Binance Faces Allegations of Financial Misdeeds in Nigeria, Including Tax Evasion and Money Laundering

Nigerian authorities are scrutinizing Binance's operations in Nigeria, alleging currency manipulation and illicit fund transfers. One Binance executive is detained in Nigeria, while another has fled after detention. The exchange faces accusations of tax evasion and circumventing Nigerian laws. Despite Binance's denial of wrongdoing and its emphasis on compliance, authorities continue their investigation, raising concerns about Nigeria's complex relationship with cryptocurrency.

Nigerian Authorities Accuse Binance of Extensive Financial Misdeeds, Including Tax Evasion, Currency Manipulation, and Facilitating Illicit Fund Transfers

Binance Executive Remains in Custody, While Another Flees Country

Alleged Violations of Nigerian Laws and Circumvention of Regulations Emerge

Lagos, Nigeria - Binance, the global cryptocurrency exchange giant, is facing intense scrutiny in Nigeria, Africa's largest cryptocurrency market. Nigerian authorities have launched a wide-ranging investigation into the company's operations, accusing it of numerous infractions, including tax evasion, currency manipulation, and facilitating the transfer of illicit funds.

Court documents obtained by Decrypt reveal that Nigerian authorities have alleged that Binance, along with its Regional Head for Africa, Nadeem Anjarwalla, and Head of Financial Crime Compliance, Tigran Gambaryan, "carried on specialized business of other financial institutions without a valid license."

Authorities have also accused the cryptocurrency exchange of manipulating the foreign exchange market, concealing the origins of illicit funds, and facilitating the transfer of a cumulative sum of $35.4 million.

In February, Binance dispatched Anjarwalla and Gambaryan to Abuja, Nigeria's capital city, to meet with senior government officials as part of the ongoing investigation into cryptocurrency exchanges. As part of the probe, Nigeria demanded that Binance provide information on its top 100 users in the country, along with their transaction history for the past six months.

On February 28th, the officials were detained on the orders of the nation's security adviser, Nuhu Ribadu. No charges were initially brought against the pair, who were held by the Economic and Financial Crimes Commission (EFCC) for 14 days under the terms of a court order, which was later extended.

On March 22nd, Anjarwalla, a British-Kenyan national, escaped custody, reportedly after he was allowed to visit a local mosque for prayers under guard. Media reports suggest he used a concealed passport to flee the country to an unknown destination. Nigeria is reportedly working with INTERPOL to return Anjarwalla to the country.

That same day, the Federal Inland Revenue Service (FIRS) filed charges of tax evasion against Binance, Anjarwalla, and Gambaryan. On March 28th, the EFCC charged Binance, Anjarwalla, and Gambaryan with money laundering.

Gambaryan, an American citizen, remains in custody and has sued the Nigerian government for unlawful detention. He was served with the charges during a court appearance yesterday and did not enter a plea. He is scheduled for formal arraignment on the money laundering charges on April 8th and the tax evasion charges on April 19th, when his plea will be entered.

The EFCC has suggested that Gambaryan could face charges on behalf of the exchange. His family has expressed concern that the Binance official is being used as a pawn by Nigerian authorities to punish his employer.

"Simply put, my husband is being held as blackmail," stated his wife, Yuki.

Binance has maintained that Gambaryan has not violated any Nigerian law and that he does not have decision-making power within the company.

In Gambaryan's suit against the Nigerian government, he alleges violations of his constitutional rights and awaits arraignment with Binance and Anjarwalla in the Federal High Court in Abuja.

"The detentions will damage Nigeria's reputation," said Seyi Awojulugbe, a senior analyst at Lagos-based risk consultancy firm SBM Intelligence.

The CEO of a Nigerian peer-to-peer cryptocurrency marketplace has dismissed allegations that cryptocurrency exchanges are used for money laundering and terror financing as "rubbish."

"There are smart people in government who know that the vast majority of any illegal activity is done with fiat, the traditional banking system, and cash dollars," Ray Youssef, CEO of NoOnes, told Decrypt.

Binance and Nigeria: A Contentious Relationship

Despite a change in leadership at Binance, with Richard Teng succeeding Changpeng Zhao as CEO, the company's relationship with Nigerian authorities remains strained. In February, Nigeria's central bank governor, Olayemi Cardoso, alleged that $26 billion had flowed through Binance Nigeria from unidentified sources in one year.

"We are concerned that certain practices go on that indicate illicit flows going through a number of these entities and suspicious flows at best," Cardoso remarked.

According to Chainalysis, a global cryptocurrency analysis firm, at least $24.2 billion was received by illicit cryptocurrency addresses globally in 2023, although the actual figure could be higher.

Bayo Onanuga, a spokesman for Nigerian President Bola Tinubu, claimed in March that Binance's operations were detrimental to the country's economy and blamed the cryptocurrency giant for weakening the local currency, the naira.

Binance has denied any wrongdoing but suspended all its naira-denominated services in March.

Last month, the FIRS filed tax evasion charges against Binance, alleging that the company had aided its Nigerian users in evading taxes.

The FIRS cited Section 40 of the FIRS Establishment Act 2007 as amended, which prohibits the non-deduction and non-remittance of taxes and prescribes penalties and potential imprisonment for defaulting entities.

Binance is also accused of failing to collect and remit value-added tax and company income tax, as well as failing to comply with tax return filing obligations.

Nigeria's Troubled Relationship with Cryptocurrency

The Binance case highlights Nigeria's complex and evolving relationship with cryptocurrency.

In May 2023, President Muhammadu Buhari signed the 2023 Finance Act, introducing a 10% capital gains tax on profits from the disposal of digital assets effective May 1, 2023.

The country also launched a national blockchain adoption policy in May 2023, aiming to mitigate risks such as money laundering and fraud and to foster trust in cryptocurrency.

Despite these initiatives, President Bola Tinubu, upon assuming office in 2023, lifted the ban on banks facilitating cryptocurrency trading but subsequently initiated a more intense crackdown on cryptocurrency exchanges.

The Central Bank of Nigeria (CBN) had already ordered the closure of all accounts linked to cryptocurrency exchanges in 2021, fearing that anonymous crypto accounts could facilitate money laundering and terror financing.

Although the Nigerian government initially indicated its willingness to allow crypto exchanges to register, new entrants are now subject to stricter registration and operation fees, and the Securities and Exchange Commission (SEC) has implemented new anti-money laundering regulations for digital asset operators.

The SEC has consistently warned investors that cryptocurrencies are risky ventures and has urged caution.

Experts contend that Nigeria's foreign exchange crisis is primarily driven by reckless spending rather than cryptocurrency trading.

"Despite the government's tendency to blame external factors, such as cryptocurrency trading, the root causes of Nigeria's forex rate challenges lie in irresponsible government spending, oil theft, and low export income levels—for which the government bears significant responsibility," stated Awojulugbe.

Binance's Response to Allegations

The crackdown on Binance commenced months after Bureau de Change operators called for a ban on the cryptocurrency giant.

"We have to do something that can stop Binance. It's a competition; we need to ban Binance, and the only way to do so is if you have liquidity," Aminu Gwadebe, head of the Association of Bureaux De Change Operators of Nigeria (ABCON), told a government-owned news agency in August.

Despite the legal challenges and allegations leveled against it in Nigeria, Binance has remained resolute in its defense. The cryptocurrency exchange has categorically denied any wrongdoing and emphasized its commitment to regulatory compliance in all jurisdictions where it operates.

Binance's chief strategy officer, Bradley Jaffe, has not responded to Decrypt's request for comment. However, in a March blog post, the company stated that it would fully cooperate with authorities while vigorously defending itself against the charges of tax evasion and illegal operations in Nigeria.

In an April blog post, Binance acknowledged ongoing discussions with Nigerian government officials regarding Gambaryan's detention.