CBN Freezing The Accounts Of Fintech Firms Like Chaka, Bambook, Risevest, Others

A federal high court in Abuja has granted the request of the Central Bank of Nigeria (CBN) to freeze accounts of Fintech companies for 180 days. The Fintech companies affected by this request include Rise Vest Technologies Limited, Bamboo Systems Technology Limited, CTL/Business Expenses, Trove Technologies Limited, and Chaka Technologies Limited. This comes few days after Nigerian Fintech Company Chaka announces partnership with TradingView. According to reports, the apex bank said it is investigating ‘illegal foreign exchange transactions by the Fintech companies. The apex bank sought the court injunction to freeze their bank accounts for 180 days pending the completion of investigations.

In the motion ex parte marked FCH/ABJ/CS/822/2021 and filed on August 4, CBN through its counsel (a former Attorney-General of the Federation) Michael Kaase Aondoakaa, submitted that “the investigation being carried out concerns what has been discovered to be serious infractions by the defendants/respondents in connection with some foreign exchange transactions, and non-documentation by the defendants/respondents in violation of the extant laws and regulations, particularly the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and the Central Bank of Nigeria foreign exchange manual.”

Aondoakaa said “That more specifically, there is a grave allegation that the defendants/respondents are engaged in illegal foreign exchange transactions, accessing/procuring of foreign exchange via their banks from the Nigerian foreign exchange market via several bureau de change, international money transfer operators and have transferred cash deposit of more than S10,000.00 (Ten thousand dollars) to various accounts overseas contrary to provisions of extant laws and regulations and also traded in foreign securities and cryptocurrencies in contravention to CBN Circular referenced TED/FEM/FPC/GEN/01/012 and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, and July 01, 2015.

Mr. Aondoakaa added that “It is evident that Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited, and Trove Technologies Limited are complicit in operating without a license as asset management companies and utilizing FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of CBN’s directive.” Considering the fact that some of the Fintech firms are principally owned by individuals and organizations based in the United States of America, the court was told.

Mr. Aondoakaa, informed the judge, Ahmed Mohammed, on Tuesday, that the forex deals by the defendants were undercutting the strength of the naira against the United States dollars. In his ruling, Ahmed Mohammed said “having listened to senior counsel to the applicant, on the motion ex parte filed in August, it is granted as prayed.” He added that any person who feels aggrieved about the freezing order is entitled to approach the court within the period to seek redress. He then adjourned the matter to February 20, 2022, for hearing. The ruling granted by the judge empowers the CBN to direct the head offices of Zenith Bank, Guaranty Trust Bank, Standard Chartered Bank, Access Bank, and VFD Microfinance Bank, to immediately freeze all the bank accounts of the defendants/ respondents for a period of 180 days pending the outcome of investigation and inquiry conducted by the CBN.

In April, the Securities and Exchange Commission (SEC) warned the investing public on the proliferation of unregistered online investment and trading platforms, facilitating access to trading in securities listed in foreign markets. Mixed reactions continue to surface from companies and customers affected. Reacting to the move by CBN, Bamboo in a message to investors said it was aware of the situation and looking into the matter, assuring investors that funds are safe. “We are aware of the recent reports about us. Our legal and government relations teams are looking into it but we thought it was important to let you know that your money remains safe and will always be accessible,” Bamboo said. Risevest, also affected by the move, said funds will also not be affected. “With regard to the latest news about us and our FX dealings, you can be sure that your investments and funds are safely managed, that funding and withdrawals will continue to be processed as normal, and that all our US operations remain intact,” Risevest wrote in a mail to investors. “We will work with regulators, as we always have to ensure that all issues raised are properly addressed. However, this does not affect our users or their investments, which are managed by regulated third parties in all jurisdictions in which we operate.” The tech companies have shown willingness to work with the regulators to address the concerns of illegitimacy.