In late February, the Nigerian government let it be known that it thought more than $26 billion had illegally flown through Binance out of the country in 2023. This estimate was made by the country’s central bank governor, who said the nation was losing out on taxes from unregistered crypto activity. A few days later, authorities in the country invited two Binance executives — Tigran Gambaryan, who runs the exchange’s financial crime compliance, and Nadeem Anjarwalla, the company's regional manager in Africa — to the country to discuss the issue. The authorities reportedly demanded that they name Nigerians trading on their platform. On Feb. 26, Gambaryan and Anjarwalla were taken into custody, but not charged with any crimes. A court granted Nigeria’s Economic and Financial Crimes Commission's request to detain the two executives for 14 days, and, though they were scheduled to appear in court on April 4, the BBC reported Gambaryan and Anjarwalla continued detention was "unlawful." The two were reportedly intercepted by national security officers after arriving in the country on the grounds that Binance operates illegally in Nigeria. A week before, the country moved to block access to multiple crypto platforms in a bid to strengthen foreign-exchange and capital controls on its crashing local currency, the naira. Nigeria is facing a scarcity of dollars as the naira has fallen around 70% against the greenback since last year. Central Bank of Nigeria Governor Olayemi Cardoso named Binance directly during a press conference in late February, when he announced a record interest rate bump to stymie the naira’s free fall. Whether Binance has contributed to Nigeria’s worsening economic picture is certainly up for debate, though, to the extent that authorities in the country are detaining mid-level executives, it seems Nigeria is looking to strong-arm the exchange and scapegoat its financial woes. At this moment in time, Binance is something of an international pariah. The world’s largest exchange just recently agreed to pay a record $4.3 billion fine to the U.S. Department of Justice for “horrendous” crimes, including facilitating terrorist financing and the very worst things you can do online. The exchange has been chased out of countless countries across the globe, and its founding CEO, the face of Binance for years, Changpeng Zhao, was ordered to step down and likely faces time in federal prison. In other words, it's unlikely that many international courts or better business bureaus would care if the exchange lived or died (this is made worse by the exchange resisting setting up a headquarters in any particular county). It’s conceivable then that Nigeria sees Binance as something to extort, an easy mark that no embassy would defend, and that many are predisposed to believe likely did facilitate illicit transfers or tax evasion in the country. It’s worth noting that, although the Nigerian government moved to block access to other crypto platforms, seemingly only Binance is under fire. In early March, Bayo Onanuga, an adviser to the Nigerian president, suggested the country could level a $10 billion fine against Binance, though he later said he was misquoted and that nothing was “finalized” yet. On Monday, the country finally got around to charging Binance with tax evasion. Nigeria’s Federal Inland Revenue Service announced on Monday that Binance faces four charges of alleged non-payment of Value-Added Tax (VAT or sales tax) and company income tax, failure to submit tax returns and complicity in aiding customers to evade taxes through its platform. Gambaryan and Anjarwalla (who has reportedly escaped custody) were identified as defendants in the case filed at the Federal High Court in Abuja, the nation’s capital, the tax agency said. Reportedly, in their initial conversations, Nigerian authorities expressed two primary concerns about Binance: that it cannot trace the money that moves through the exchange, and that the exchange was putting pressure on the naira by facilitating trading on its peer-to-peer marketplace. Binance halted all support for its peer-to-peer marketplace in Nigeria on March 8 due to the pressure from the country’s government. The service apparently grew in popularity in 2021 after former President Muhammadu Buharithe banned much crypto activity in the country. In July 2023, Nigeria’s Securities and Exchange Commission issued a warning about Binance, alleging that “any investing public dealing with this entity” was doing so at a “high level of risk” of losing their fund. However it isn’t only Binance that the country is cracking down on. Bloomberg reported that the “anti-graft” officers had been arresting street currency traders and other supposedly unlicensed forex operators. This certainly adds context to Nigeria having asked Binance for information on its top 100 users in the country as well as the exchange’s last six months of transaction history. Binance said around the time Gambaryan and Anjarwalla were arrested it had previously cooperated with Nigerian agencies, responding to 626 information requests from law enforcement over the last four years. A team even engaged in the anti-graft agency’s training sessions towards the end of last year. Nigeria’s economic situation could certainly have been exacerbated by crypto. Bitcoin and stablecoins see above-average levels of adoption and use in countries facing inflation and economic turmoil for a reason: crypto is a way to opt out of a bad situation. That may be why, in December 2023, the Central Bank of Nigeria lifted the ban for banks engaging in crypto and issued regulatory guidelines for virtual asset service providers. These would give authorities greater control over and insight into crypto usage. However, many economists see a confluence of factors pummeling the naira. An already weak economy was made worse after President Bola Tinubu relaxed the country’s foreign exchange policies and cut the naira’s peg in a bid to attract foreign investment and diversify the oil-dependent nation’s economy. Investment, unfortunately, has been slow to come in (in fact, many foreign companies are leaving the country), and the naira has been on a monthslong decline. It’s a bleak story. President Tinubu, who took office in May 2023, has vowed to support local businesses, invest in infrastructure and tackle the problem of jihadi terrorists cutting into Nigeria’s shipping. That crypto is also a national priority on par with pirating is an interesting signal for the entire crypto industry, whether legitimate or not. Of course, Nigeria might do well to welcome the crypto industry to the country, which will help jumpstart a financial services industry and contribute to the national coffers. Notably, after Gambaryan and Anjarwalla’s arrest, a Binance spokesperson said that Nigeria was “not yet” one of its top markets, though the country, with a population of more than 200 million people, holds “extraordinary potential and we hope to continue to invest there.”
There is also nothing inherently wrong with going after a company that hasn’t paid its taxes or is operating out-of-sight of financial regulators. But, dear lord, take aim at the company, not middle-managers and executives with families. Otherwise, instead of cheering on a legitimate investigation, the world might hope more political prisoners escape.
Read the story online... – D.K.
@danielgkuhn daniel@coindesk.com | 