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Top cryptocurrency platform Binance is accused of tax evasion, currency speculation and money laundering by Abuja
The misfortunes of Binance, the world's biggest crypto currency trading platform, have not ended with a four-month jail sentence for its former Chief Executive Changpang Zhao in the United States on 30 April. Now Zhao's successor as CEO, Richard Teng, is running Binance's next legal showdown – with Nigeria's government. Two of its employees were detained after a meeting in Abuja in which they were confronted with allegations of criminal behaviour.
Zhao set up Binance in 2017. Last November it was fined US$4.3 billion for facilitating 100,000 transactions linked to organised crime, violent extremism, sanctioned entities and paedophile rings. And the company's braggadocio is still haunting it. One of the prosecutors reported that Zhao, who resigned last year before his trial opened, had told his team that if Binance had fully complied with US law it would not be as big as it is today.
Officials in Abuja say that Binance came close to destroying what is now only Africa's third largest economy by facilitating money laundering on an epic scale. (AC Vol 65 No 3, Shock therapy keeps the people waiting). The trading of billions of naira through the Binance platform worsened the currency's instability at critical periods in late 2023 and early this year, they add.
But on 6 May, Binance's Teng hit back with claims that the company was asked for a 'secret' payment in Abuja to make its legal problems in Nigeria go away. The firm, he insists, is putting its house in order globally. And he claims that Tigran Gambaryan, head of compliance at Binance, is in detention in Nigeria for blowing the whistle on senior politicians soliciting bribes.
Binance has lobbied for Gambaryan's release through back channels – Gambaryan is a former US Internal Revenue Service agent – and local and international media. That hasn't worked with Nuhu Ribadu, Nigeria's first National Security Advisor (NSA) without a military background. An energetic former anti-corruption chief, Ribadu says he will see Binance in court. Gambaryan's trial is due to start on 17 May.
Binance is not unfamiliar with the legal setting. In recent years, regulators across Europe and Asia have sanctioned the platform over compliance and data issues. But the US prosecution was the most serious blow against Binance.
Nigeria is making similar claims against Binance. Binance told investigators in January that turnover in Nigeria in 2023 was $21bn, five times the federal defence budget, and profits, generated by transaction fees, were more than $30 million.
Officials believed the figures to be a significant under-estimate and requested additional details. Binance declined and continues to ignore a 29 February High Court Order to provide the requested data. Ignoring a High Court Order is a criminal offence in Nigeria.
Binance is not registered in Nigeria and pays no tax there. It has never filed a Suspicious Transaction Report, despite what investigators in Abuja say is an apparently clear and systemic pattern of money laundering.
Binance operates in Nigeria through a network of local companies but several foreign executives listed with the Corporate Affairs Commission as directors of those local companies have also worked with more established Binance entities in other parts of the world.
Binance was concerned about one particular accusation of corruption. Teng alleges that in January an unnamed agent claiming to represent Committee members of the House of Representatives demanded a $150m bribe, to be paid in crypto, for dropping an inquiry into Binance's operations in Nigeria.
Security sources say an investigation into the allegation began shortly after it was made by Binance. They say there is no correlation between the alleged attempted bribery and the action against Binance, which includes charges of money laundering and related offences against the company and Gambaryan.
Gambaryan was moved to Kuje prison from an NSA guest house after a second executive, Nadeem Anjarwalla, used the pretext of Friday prayers and a second passport to abscond. Anjarwalla now faces an Interpol arrest warrant.
'We would love the scalp of a senior politician, if we can prove a case of attempted bribery,' an investigator told us in Abuja. 'First they said they were lured here. Now they accept they asked for a meeting. But Binance have offered no real assistance in our efforts to understand the millions of transactions of uncertain origin that passed through the platform,' the investigator continued.
Nigeria's investigators accept that the platform doesn't commission kidnapping, terrorism, fraud or oil bunkering, but '…enables illegal activity, including currency speculation on an almost unimaginable scale.'
Many bankers and economists expressed concern over the vulnerability of Nigeria's economy after President Bola Tinubu used his inauguration speech on 29 May last year to announce a liberalisation programme long championed by the World Bank, IMF and international financial media.
According to the theory, the currency would fall, with short-term pain a trade-off for longer term transparency and competitiveness. But officials at the Central Bank argue that an avalanche of speculation through Binance and other platforms distorted economic fundamentals, triggering a sharp collapse in the naira against the dollar from N500 to N900 in the second half of 2023 – and to N1,600 in February (AC Vol 65 No 9, Cardoso plans a brave new banking world).
According to a Central Bank of Nigeria source: 'Binance was effectively setting the rate for the naira, washing a huge amount of money of uncertain origin. Our existing problems with money laundering increased exponentially. The cost of goods and services, our international loans and other instruments, shot up,' (AC Vol 65 No 5, Spiralling prices imperil Tinubu's reforms).
Binance made a lot of money, as did the speculators, according to the source. This unregulated trading was triggering far wider economic stresses and strains just as the government was hoping the naira would stabilise against the dollar (AC Vol 65 No 6, Cost-of-living crisis forces government rethink). It became an issue way beyond markets and regulation, the source added, explaining the involvement of the National Security Advisor. Other arms of government have jumped into the case too.
Emomotimi Agama, Director General of the Securities and Exchange Commission, told a meeting of blockchain and cryptocurrency associations in Nigeria that the naira should be delisted from Peer-to-Peer trading platforms. It was Peer-to-Peer trading which facilitates vast speculative raids on the naira that hastened the currency's crash against the dollar.
Agama's other initiative – a 0.5% charge on all electronic transfers which was rapidly revised downwards by the Central Bank to 0.005% – was less well received by the wider public. He added that the SEC was finetuning guidelines for digital asset trading which would cover all cryptocurrency operations, from wallet providers to exchange platform providers and brokerage services.
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