CBN Has Reportedly Frozen The Accounts Of Four Nigerian Investment Fintechs
CBN has reportedly frozen the accounts of four Nigerian investment fintechs
The Central Bank of Nigeria has been granted an order by a Federal High Court in Abuja to freeze the accounts of Nigerian investment-tech companies Bamboo, Rise, Chaka, and Trove, according to the court's decision.
The order will be in effect for 180 days (six months), during which time the apex bank will conduct investigations into the matter.
Michael Aandoakaa, counsel for the Central Bank of Nigeria (CBN), filed a motion paper in which he requested that the bank accounts associated with these platforms be temporarily frozen.
According to the Central Bank of Nigeria, Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited, and Trove Technologies Limited were complicit in operating without a license as asset management companies "and utilizing foreign exchange obtained from the Nigerian foreign exchange market for the purpose of purchasing foreign bonds/shares in contravention of the Central Bank of Nigeria Circular referenced TED/FEM/FPC/GEN/01/012, dated July 01, 201" and in contravention of the CBN circular referenced TED/
In an interesting twist, in June 2021, Chaka became the first investment-tech company to obtain a digital stock trading license from the Nigerian Securities and Exchange Commission (SEC), marking a first for the country.
Although asset management companies are typically under the jurisdiction of the Securities and Exchange Commission, it appears that the Central Bank of Nigeria is bringing this suit under its regulatory authority over foreign exchange.
According to an affidavit signed by Christiana Gyang, Senior Supervisor at the Central Bank of Nigeria, Risevest engaged in cryptocurrency trading in violation of the CBN's circular dated February 5, 2021.
According to The Whistler, Aandoakaa testified before Justice Ahmed Mohammed that the foreign exchange transactions conducted with the defendants were a contributing factor to the Naira's depreciation against the US Dollar. According to him, the freezing of 15 accounts associated with these platforms is necessary for a variety of reasons.
Is there more to it?
There are a number of questions that arise. What impact does this have on users? Will they be able to get their money back if they do? In what time frame will the order be put into effect? Will these businesses be unable to operate for the duration of the contract? Is it possible for the companies to transfer their funds?
As of the time of publication, Bamboo informed users via a tweet that their money was still safe and easily accessible.
Additionally, Eleanya Eke, the CEO of Risevest, issued a statement on Twitter to reassure users that trading activities will continue as usual. In addition, the company has sent out an official email to its customers.
In order to offer foreign stocks, companies such as Chaka, Bamboo, and Trove collaborate with Drivewealth Capital, which is based in the United States and regulated by the Securities and Exchange Commission of the United States.
According to the company's website, it uses third-party partnerships to provide foreign stocks to its customers.
Essentially, because they claim not to manage investor funds directly, these startups are likely to have customer investments in US bank accounts as well.
As a result of this order, their internal operations will most likely be hampered, and bill and salary payments will most likely become more complicated.
While granting the order, Justice Mohammed stated that anyone who believes they have been wronged by the freezing order has the right to file a complaint with the court within a specified time period to seek redress. The matter has been postponed until February 20, 2022, in order to be heard.
