CBN reportedly freezes accounts of 4 Nigerian investment fintechs for allegedly operating without licenses

The CBN has reportedly obtained a court order to temporarily freeze the accounts of at least 4 Nigerian investment technology startups. The affected fintechs are Trove Finance, Bamboo Systems Technologies, Risevest Technologies and Chaka.

The CBN, through its counsel, Chief Micheal Kaase Aondoakaa, SAN, told Justice Ahmed Mohammed of the Federal High Court, Abuja that the investment companies were playing a part in making the Naira weaker to the United States dollars, because of the foreign exchange deals carried out on their platforms. There was therefore the need to block 15 of their accounts for about 180 days.

According to the CBN, the online investment startups were operating as asset management companies without obtaining licenses. They were also alleged to be “utilizing FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of the CBN circular referenced TED/FEM/FPC/GEN/01/012, dated July 01, 2015.”

The companies were accused of carrying out activities beyond those which they were incorporated in violation of Nigeria’s trading laws. According to an affidavit filed by a Senior Supervisor of the CBN, Christiana Gyang, the CBN had reviewed the activities of the fintechs to determine their alleged involvement in illegal foreign exchange (FX) dealings.

“Rise Vest Technologies Limited was Incorporated In October 2018 with objects of technological and business consultancy. The shareholders of the company at incorporation were Eke Eleanya Urum and Rise Vest Technologies Limited (USA),” she said.

The CBN says while the company was incorporated to partner with companies involved in payments and settlements as well as internal and international remittances, information on the company’s website describes it as an asset management company, providing a platform for customers to invest in foreign instruments through the “Risevest” app.

“Our review revealed that the company consummated its asset management activities through its account 1017556580 with Zenith Bank Plc, which recorded a turnover of 1.97 billion between January 1, 2019 and April 27, 2021.

“Inflows to the account were mainly from retail investors through two Payment Service Solution Providers (PSSPe): Flutterwave (588.61 million) and Monnify (N967.58 million). Outflows from the account were to a PSSP – Paystack (500 00 million) and cryptocurrency traders Ike BuyCoins (N110.00 million) and Beltlum Venture (N350.00 million). Inquiries on the transactions confirmed that the transfers to Buycoins were for the purchase of cryptocurrency,” the apex bank said.

The country’s financial regulator insists the above is indicative that Rise Vest Technologies Limited traded in cryptocurrencies in contravention of the CBN circular referenced BSD/DIR/PUB/LAB/014/001, dated February 5 2021.

For Bamboo, the CBN said it was incorporated in December 2018 to carry on the business of software design, implementation, development, maintenance and consultancy amongst others. However, reviews showed that Bamboo operates an online investment app.

“Further reviews showed that Bamboo Systems Technology Limited operates an online App, “Bamboo”, that provides a medium for investors to buy and sell stocks, exchange traded funds (ETFs), Index funds and derivatives listed in major exchanges in the U.S.”

With more than 700,000 users between them based on app downloads, billions of naira of investor money are expected to have been frozen with the court order. This includes finances from Forex, investment in foreign stocks and of course, cryptocurrencies.

This development comes at a time when the tech community is outraged over a leaked National Information Technology Development Agency (NITDA) bill that is seeking to introduce the agency as the sole authority in the Nigerian tech space.

The Federal High Court in Abuja adjourned the case to February 20, however, any party who still feel aggrieved can approach the court for a reversal before then. It remains to be seen if the fintechs will do so.