Nigeria Sues Traders Over Unlicensed Stablecoin USDT Naira Trading

Earlier this month, the Federal Government of Nigeria filed a criminal complaint against four Nigerian crypto traders – Ejiogu A. Chinedu, Nnamdi F. Okereke, Oty Ugochukwu Stanley and Chukwuebuka F. Ogumba – and some firms for doing business, including USDT and Naira, doing business virtually like financial institutions without a valid banking license.

According to information obtained and reported exclusively by Nairametrics, the government believes that the accused defendants have violated the Banks and Other Financial Institutions Act of 2020 through their business transactions and is filing suit at the Federal High Court in Abuja, the country’s capital – to impose the appropriate punishment.

Brief background

This legal action follows the Nigerian Economic and Financial Crimes Commission (EFCC) investigation into alleged activities across multiple bank accounts of individuals using digital asset exchanges to manipulate the value of the naira and launder the proceeds of these activities.

The EFCC filed a motion to freeze the identified accounts pending the completion of its investigation. The court later issued a preliminary injunction that resulted in over 1,000 accounts listed in the commission’s April 24 motion being suspended for more than ninety days. These accounts held over 548.6 million naira, or approximately over $330,000, at the time of writing.

The accused parties were able to enforce their application to revoke several freezing orders issued by the court. However, this was short-lived as the Commission filed a new application to block these accounts pending the completion of its investigation, which the court granted on September 4, after also separately filing criminal charges against the alleged operators of the accounts in question.

Details of the Nigerian government’s lawsuit

In the case filed by the Nigerian government, the prosecution notes that the defendants – the crypto traders – conducted their business activities without being authorized traders on the Nigeria Autonomous Foreign Exchange Market (AFEM), where allegedly publicly trading USDT-to-Naira Exchange rates were negotiated in breach of Section 29(1)(c) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act – a law that criminalises any foreign exchange negotiation that is not permitted by law.

Additionally, according to government filings in June and July, the defendants are accused by the Nigerian government of conducting business activities without a valid license from 2021 to January 2024.

However, this is an ongoing court case, with legal teams from both sides making their case accordingly. It remains unclear how long this case will last, but we can safely assume that it will continue for quite some time before the Supreme Court makes a final decision.

consequences of this lawsuit

The Nigerian government’s lawsuit could set a chilling precedent for those offering P2P OTC services to assume that they need a banking license to facilitate USDT and Naira trading, or to assume that they do Engage in illegal activities if the sentence in this case – should the defendants be found guilty – is valid as a basic sentence.

With Nigeria among the leading adopters and adopters of USDT and Bitcoin, according to data from Chainalysis, the operating climate for digital asset companies will undoubtedly continue to tighten.

Nigerian Government Opinion on Bitcoin and Stablecoins

For those following the regulatory landscape in Nigeria, these developments come as no surprise. On the one hand, the Nigerian government is trying to do everything in its power to defend the naira as it continues to plummet against the US dollar and protect consumers and investors, while on the other hand it is trying to create an enabling environment for the digital assets Space to develop.

However, as long as there is no distinction between Bitcoin and the wider space, we are likely to see further developments of this kind.

We will have to wait and see how this lawsuit and other developments in the regulatory environment unfold. Suffice it to say, it’s not all doom and gloom. Now is the time for relevant stakeholders to engage regulators constructively to achieve a more favorable position for all parties, including the government.