Nigeria's Central Bank freezes the bank accounts of six fintech startups

Nigeria's Central Bank freezes the bank accounts of six fintech startups

A federal high court in Abuja, Nigeria, has on Tuesday granted the request of the Central Bank of Nigeria (CBN) to freeze the account of six fintech companies.

The Fintech startups affected by the ex parte motion include Rise Vest Technologies, Bamboo Systems Technology Limited, Bamboo System Technologies Limited OPNS, Chaka technologies Limited, CTL/Business Expenses, and Trove Technologies Limited.

These platforms offer Nigerians access to stocks, Bonds and other securities in both local and international markets and have overtime grown to command a very large user base, especially among young people.

According to court papers sighted by The Cable on Tuesday, the apex bank claimed it was investigating ‘illegal foreign exchange transactions’ by the Fintech companies. The Central Bank also sought an injunction to freeze their bank accounts for 180 days pending the completion of the investigation.

This is not the first time the CBN will be taking a hard line posture on Nigerian Fintech companies. In February this year, the Apex bank directed banks not to provide banking services to crypto fintech startups in Nigeria, thus leading to the disruption of their business models. At the time, Rise Vest was one of the victims.

We also reported in April that the Nigerian Securities and Exchange Commission declared the activities of some of these investment Fintech startups illegal.

According to the ex parte motion filed by the CBN through its counsel, Michael Kaase Aondoakaa, it says 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.”

“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 bureaux 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.”

“It is evident that Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited and Trove Technologies Limited are complicit in operating without license as asset management companies and utilising FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of CBN’s directive.”

The judge approved the Apex Bank’s prayer and ordered a 180 day freeze on the account of the affected companies pending the outcome of the CBN investigation.

Response from the companies

Reacting to the court injunction, Rise Vest, Bamboo and Trove assured it’s customers that funds belonging to users were safe, adding that funding and withdrawals will continue to be processed as usual.

“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,” Rise Vest said in an email to customers on Tuesday night.

Rise ? on Twitter: “Our statement on the latest CBN order on our FX dealings.” / Twitter

While Trove released a statement saying it’s “currently liaising with the officials of the CBN to get more clarity on the circular.” Adding that it’s working with legal practitioners to manage the ongoing mediation.

Bamboo and Chaka also released a statement along the same lines.

Bamboo on Twitter: “Hi everyone, we’re 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 with Bamboo and will always be readily accessible.” / Twitter

Chaka on Twitter: “Dear Investors, In respect to the recent news, please be rest assured that your investments remain safe and accessible on Chaka.” / Twitter