UPDATED: Binance’s operations negatively impacted Nigeria’s financial system – SEC director

…FIRS amends tax evasion charge

A Federal High Court in Abuja heard on Friday, May 17, how the operations of Binance Holdings Limited negatively impacted Nigeria’s financial system.

A director with the Security and Exchange Commission (SEC), Abdulkadir Abbas told the court that not only did Binance operate in Nigeria illegally, its mode of operation circumvented the normal currency trading route put in place by regulators.

Abbas, who is the Director of Registration, Exchanges and Market Infrastructure Department at SEC spoke while testifying as the first prosecution witness in the trial of Binance, and two of its officials on a charge bordering on money laundering.

Binance, Tigran Gambaryan Nadeem Anjarwalla, the firm’s Regional Manager for Africa (who escaped from lawful custody) is being prosecuted by the Economic and Financial Crimes Commission (EFCC).

Led in evidence by prosecuting lawyer, Ekele Iheanacho, Abbas said he met Gambaryan once during a meeting at the office of the National Security Adviser (NSA).

Abbas said Binance and its officials were invited by the NSA to the meeting to discuss its operations and the impact on the Nigerian economy.

The witness added: “At the meeting, it was clearly observed that the first defendant’s (Binance’s) mode of operation is against the provision of the Investment and Securities Act 2007

“Apart from not being registered in Nigeria and making public solicitation without authorisation, the first defendant operates a naira peer-to-peer (P2P) in exchange for crypto assets

“The naira P2P being deployed in the transaction circumvents the normal trading route.

“This is because the Central Bank of Nigeria (CBN) has banned banks from providing certain settlement platforms for crypto exchange.

“As a result of the naira P2P deployed by Binance, and coupled with the large number of Nigerian users, who were leveraging on that model, it adversely affected the official exchange rate.

“As a matter of fact, the Binance platform became a reference point for determining the exchange rate.

“The naira P2P model created uncertainty and a high level of volatility in the exchange rate as Nigerian users’ trade arbitrarily on the platform, thereby impacting negatively financial system stability.

“This was one of the serious concerns raised at the meeting we had at the office of the NSA,” the witness said

He added that the rate at which naira was being sold on Binance’s platform had not relationship with the official exchange rate.

Abbas said the rate on Binance’s platform was not driven by any fundamentals, adding that it got to a stage where the value of the naira was determined based on the rate quoted on Binance’s platform.

He said the rate had no correlation or relationship with the official rate.

The witness said by operating its platform, which is not registered or regulated by the SEC in Nigeria, Binance was in breach of the extant provisions of the Investment and Securities Act 2007

“In addition, by making public solicitation to Nigerians without due authorization by the SEC, the first defendant violated the Investment and Security Act,” the witness said.

At the conclusion of his evidence-in-chief, lawyer to Binance, Babatunde Fagbohunlu (SAN) he needed to retrieve some documents from the court with which he planned to cross-examine the witness.

Fagbohunlu said he submitted an application to that effect earlier in the day, which was not yet approved.

He sought a short stand down to enable him to confirm if his application was approved and if the documents could be made available to him.

Justice Emeka Nwite noted that since his application was filed today, it may be difficult to have it approved if the case was stood down.

Justice Nwite elected to adjourn till May 23 at 12 noon for cross-examination.

In an earlier ruling, Justice Nwite dismissed the bail application filed by Gambaryan, who is currently being held in Kuje prison, Abuja.

Justice Nwite held that there was a likelihood that Gambaryan would jump bail, bearing in mind the fact that he has no family members or relatives in the country.

Justice Nwite agreed with the prosecution that with the earlier escape of Gambaryan’s co-defendant, Nadeem Anjarwalla (the Binance Regional Manager for Africa) from custody, it would be unwise to grant bail to Gambaryan.

Also, the court adjourned till May 22 for the arraignment of Binance and Gambaryan on an amended tax evasion charge brought against them by the Federal Inland Revenue Service (FIRS).

The FIRS amended the charge to reflect that Anjarwalla, earlier listed as one of the defendants, was now at large.