Understanding The Allegations Levelled Against Nigerian Fintech Unicorn, Flutterwave

When Nigerian Fintech startup, Flutterwave started about 6 years ago, it came with a lot of promise for the African continent. The tech company founded by 3 buddies, Iyinoluwa Aboyeji, Olugbenga Agboola and Adeleke Adekoya main mandate upon launch was the provision of a payment infrastructure and payment service providers across Africa and though it was headquartered in San, Francisco, California, it majored its operations in 11 African countries including Nigeria, Kenya, Ghana and South Africa.

The company grew in leaps and bounds and in 2021, just 5 years after it was founded, it was able to raise a Series C funding round of a whooping 170 million US dollars, the highest amount at that time ever secured by an African tech startup. Flutterwave in 2021 was valued at 1 billion US dollars, effectively joining the growing list of over 803 unicorns in the world. For readers who may not be in the know what a unicorn is, a unicorn according to Wikipedia is a privately held startup that is valued over 1 Billion US dollars, with ByteDance, TikTok parent company, SpaceX and Stripe the largest unicorns in the world.

The coordinated rise of Flutterwave led to a flurry of investors like Y-Combinator, Visa Ventures, Mastercard, Avenir Growth Capital, and Tiger Global Management.

 By 2022, the company raised a 250 million US dollars Series D funding round with over 3 billion US dollars valuation.

In its push to spread its tentacles to Africans in Diaspora, and shortly after launching ‘Send’ a African-focused remittances service, Flutterwave December 2021 signed afrobeat superstar, Wizkid as its global brand ambassador to further globalize its gospel.

THE INSIDER TRADING AND FRAUD CONTROVERSY

Controversial investigative journalist, David Hundeyin, known for his different espouse on corruption, and other vices in an April 12 article blew the lid on the fintech startup whence he accused the company of Insider trading, fraud and perjury.

Titling the piece, “Flutterwave: The African Unicorn Built On Quicksand”, Hundeyin, in the report beamed his focus on Olugbenga Agboola, one of the Co-Founders of the company, who he accused of engaging in impersonation, insider trading and inappropriate behaviors in the workplace.

Now let’s take a look at the highlights of the accusations by David Hundeyin in the article.

• Hundeyin based his discoveries on interviews he had with three formeremployees of Flutterwave with whom he said he had fact-finding discussion with for his story. The expose majorly centered on Olugbenga Agboola also known as “GB”, a co-founder of Flutterwave.
• GB (Olugbenga Agboola)  was accused of engaging in “insider trading” by offering to buy “stock options” from employees at a price “lower” than the “market price”, an action he posited was an offence under  the US law and could attract jail time.
• Olugbenga Agboola (GB) was also accused in the write-up of impersonation and double-dealing as he used his affinity with Nigeria’s largest bank by asset value, Access Bank to work in deals to Flutterwave without the knowledge of clients and the bank. He also alleged that GB was working for Access Bank at the time.
• Flutterwave was also accused of engaging in fraudulent activities as it facilitated transactions with Arik Air without proper documentation.
• Flutterwave was accused of corruption enablement with Arik Air as he alleged that someone someone at Arik began a payments company with the public intention of processing payments for Arik, but he processed them via Flutterwave, and in the process was getting a cut of every Arik transaction. Hundeyin also alleged that Arik transaction volumes were among the biggest at Flutterwave, without the presence of a reseller agreement.
• Legal firm, Banwo and Ighodalo “B&I”  was accused of complicity in the fraudulent machinations of the company as they caved in to the demand of Flutterwave to legally advise a client who had initiated a case against the company to discontinue the case, even after they had supported the suit from the start.
•  Olugbenga  Agboola (GB)in his own way to silence controversies, and wants to have his way to want anything in Nigeria, just signs a cheque and makes any problem go away.”
• The investors in Fluttewave were aware of these damning accusations by the former employees but they largely ignored them. Hundeyin wrote in the article: “Someone sent an email detailing all these fraudulent activities to every investor on the cap table, and they are all aware and they talk about it, but they did nothing.”
• Olugbenga Agboola kept his job at Access Bank while building Flutterwave concurrently for at least 2 years while using a young tech figure as the convenient face of his business.

A CURSORY LOOK AT THE IMPLICATIONS OF THE ALLEGATIONS

Bullying: In addition to Hundeyin’s article, the CEO of a Softbank-backed Kenyan fintech company, Credrails, Ms. Odero on April 4 vowed not to be silenced anymore as she claimed she was subjected to by GB.

“The Flutterwave CEO is bullying me and it ends today”, she had written on April 4.

On the Nigerian Fintech scandal, Odero wrote, “I have been constantly belittled, lied about, harassed, had my name tarnished and almost arrested because of Olugbenga Agboola the CEO of Flutterwave and I am calling time. It has been almost 5 years of constant harassment and I am over it all.”

Odero, while giving insight on her stint with the company, said she decided to quit her job at Flutterwave in late 2018.

“A lot of things happened and in the end, I felt like I was not being treated well and rendered my resignation. Before the attempt to paint me as anything but a stellar employee is made, this, from the company Slack channel says otherwise,” she introduced a series of screenshots from the company’s workgroup which commended her achievements.

 “I am sick of it, to be honest. It has been almost 5 years of constant bullying, trying to malign my name and just make my life more difficult. All of it stems from me deciding to leave, ask for what is fairly mine AND ask to be compensated for Flutterwave’s negligence.

Implications: The allegations though not yet proven in the law court, at face value could scare away investors from the unicorn tech startup and further erode public confidence in the company.

Sexual Harassment: Though Odera says she hasn’t spoken about the sexual harassment claims at Flutterwave because she has no knowledge of them, other former employees according to Hundeyin confided in him how JB tries to sexually molest his female staffs and make life diffivult for them in the event they do not oblige to his amorous request.

Odero further speaking on the allegations of sexual impropriety, wrote:

“However, sexual impropriety is an issue of abuse of power; using the power you have over your subordinates to get sexual favours. The same power Olugbenga Agboola has been using to make my life so very hard for so very long simply because I stood up for myself.

“It ends today. I am speaking up because when does it stop? When do I stop being the target of a powerful man trying to stick it to me for standing up for myself?

Implications: The allegations of harassment and sexual impropriety places a huge dent on the integrity of the company, its board of directors and may erode public trust in the booming startup.

Insider Trading: Insider trading is when the stock or other securities (such as bonds or stock options) based on material; nonpublic information of a company is being traded. It refers to in simple terms the practice of purchasing or selling a publicly-traded company’s securities while in possession of material information that is not yet public information In various countries, some kinds of trading based on insider information is illegal.

According to SEC.GOV, “Insider trading” refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.

Implications: The agency listed that Insider Trading can result in a prison sentence and civil and criminal fines for the individuals who commit the violation, and civil and criminal fines for the entities that commit the violation.

It also says the company can be subject to a civil monetary penalty even if the directors, officers or employees who committed the violation concealed their activities from the Company.

The maximum prison sentence for an insider trading violation has been set to 20 years, while the maximum criminal fine for individuals now set to $5,000,000, and the maximum fine for non-natural persons (such as an entity whose securities are publicly traded)  now set $25,000,000.

As part of the civil sanctions imposed on violators of Insider Trading laws, violators ‘may become subject to an injunction and may be forced to disgorge any profits gained or losses avoided’, with the civil penalty for a violator in cases shooting up to three times the profit gained or loss avoided as a result of the insider trading violation.

It should be noted that Insider Trading prohibitions vary from country to country and the stated sanction above are for the United States where Flutterwave is domiciled.

David Hundeyin himself enumerated the implications of Insider Trading when Nigerian based financial resource company, Nairametrics reached out to him.

“Under American SEC regulations, insider trading also applies to companies whose stocks are traded privately. Contrary to the popular idea, there are in fact pricing mechanisms to determine the market price of non publicly traded stocks, using workarounds like Pitchbook, which function as de-facto stock trade ledgers for private stocks.

“Thus, contrary to the narrative being promoted that such stocks can be priced unilaterally by an individual since there is no supply and demand equilibrium matching mechanism, the market prices of private stocks can in fact be accessed easily. This classifies the deliberate underpricing of employee stocks and subsequent stock buyback of such underpriced stocks as insider trading, which carries a penalty of up to 20 years imprisonment in the US”, he said.

Hundeyin told the financial journal that different employees had different stock option contracts which perhaps explained the trigger for the alleged “insider trading”.

” It should also be noted that clauses stipulating what prices employees would be allowed to sell their stocks at were not in fact included in Flutterwave employment contracts for the period in question. Thus different employees were able to obtain different prices for their stocks depending on their bargaining power or influence with the CEO, which potentially opened the door to a whole new set of problems relating to favouritism, office politics and inappropriate workplace relationships”, he added.

REFERENCES: West African Weekly, Wikipedia, SEC.GOV, Nairametrics