*Firm Breached Nigerian Law, Operated Naira P2P In Exchange Of Crypto Assets- Witness

*Firs Files Amended Charge Against Binance

A FEDERAL High Court, Abuja, on Friday, May 17, dismissed a bail application filed by the detained Binance executive, Tigran Gambaryan.

Justice Emeka Nwite, in the ruling, said based on the affidavit evidence before him, Gambaryan would jump bail if the application was granted.

He ruled: “I have carefully considered the affidavit evidence before me and I am of the view that the applicant will jump bail if granted bail.”

He, however, ordered for an accelerated hearing in the trial.

Justice Nwite had on April 23, fixed May 17 for the ruling after Counsel for the Economic and Financial Crimes Commission (EFCC), Mr. Ekele Iheanacho, and Gambaryan’s lawyer, Mark Mordi (SAN), adopted their processes and argued their case against and for the bail application.

He ordered the remand of Gambaryan in Kuje Correctional Centre after he pleaded not guilty to the money laundering charges brought against him by the anti-graft agency.

The EFCC had accused Binance, Gambaryan and fugitive executive- Nadeem Anjarwalla-of allegedly conspiring among themselves to conceal the origin of the financial proceeds of their alleged unlawful activities in Nigeria, including $35,400, 000, thereby alleged committing an offence contrary to Section 21 (a) and punishable under Section 18(3) of the Money Laundering (Prevention and Prohibition) Act, 2022, among others.

 Anjarwalla escaped from lawful custody on March 22 and fled Nigeria for Kenya, where he has reportedly been arrested and awaiting extradition to Nigeria to face the charges.

Mordi, on Gambaryan’s behalf, had filed an application seeking an order of the court to the EFCC to release his client on bail, pending the hearing and determination of the substantive case.

The Counsel, at the last adjourned date, had argued that the agency had failed to produce any credible evidence to oppose his application, noting that the complainant’s allegation that Gambaryan was planning to escape from custody, like Anjarwalla, was not true.

“There is no exhibit or document displaying EFCC’s credible intelligence,” he insisted.

But Iheanacho disagreed with Mordi, arguing that the court would be taken a grave risk by granting the Binance agent a bail, because he had no attachment to any community in Nigeria or competent person to stand as his surety.

He reminded the court that Gambaryan attempted to apply for a new United States (US) passport while in custody, knowing fully well his international passport was seized by the Nigerian state.

The EFCC lawyer reiterated that the defendant was a flight risk and that if granted bail, he would jump bail, like his colleague.

He disagreed that the Commission had not provided credible evidence that Gambaryan was planning to escape, saying going by the deposition in their counter-affidavit, the deponent was one of the investigative team that investigated the case.

He urged the court to dismissed the bail application or in the alternative, return the applicant to EFCC custody, if the Judge decides to grant him bail.

The Director of Registration, Exchanges and Market Infrastructure Department of the Security and Exchange Commission (SEC), Mr. Abdulkadir Abbas, told the court how Binance Holdings Limited breached the Nigerian law to operate naira peer-to-peer services in exchange of crypto assets.

Abbas, the 1st prosecution witness (PW1), who disclosed this while testifying in the case, said due to the large number of Nigerian users who were leveraging on the model, it adversely affected the official exchange rate, noting: “As a matter of fact, the Binance platform became a reference point for determining the exchange rate.”

Led in evidence by Iheanacho, Abbas said the company’s operations negatively impacted Nigeria’s financial system, adding that not only did Binance operate in Nigeria illegally, its mode of operation circumvented the normal currency trading route put in place by regulators.

Abass said he met Gambaryan once during a meeting at the office of the National Security Adviser (NSA), after Binance and its officials were invited by the NSA to discuss its operations and impact on the Nigerian economy.

He submitted: “At the meeting, it was clearly observed that the 1st defendant’s (Binance) 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 1st defendant operates a naira peer-to-peer (P2P) in exchange of crypto assets. 

“The naira P2P being deployed in the transaction, circumvent the normal trading route, 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.”

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

“The naira P2P rate quoted on Binance’s platform is not referencing any official rate and its continuous operation affects the value of our naira.

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

The PW1 added that the rate at which naira was being sold on Binance’s platform had no relationship with the official exchange rate, or was the rate on its platform 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 insisted that the rate had no correlation or relationship with the official rate and that by operating its platform, which was 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 authorisation by the SEC, the 1st defendant violated the Investment and Security Act,” he said.

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

Fagbohunlu said he had submitted an application to that effect earlier in the day, which was not yet approved and sought a short stand down to enable him confirm if his application was approved and if the documents could be made available to him.

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

The trial judge elected to adjourn until 12 noon on May 23 for cross examination.

In a related development, the Federal Inland Revenue Service (FIRS) has filed an amended four-count charge against Binance and Gambaryan for alleged tax evasion.

FIRS’ lawyer, Mr. Moses Ideho, who made this known before Justice Nwite, informed the court that following Anjarwalla’s escape from lawful custody, the Service deemed it necessary to amend the charge to properly reflect Anjarwalla’s position in the instant charge, as being at large.

“We apply to substitute our charge, dated 22nd of March, 2024, with an amended charge, dated 17th of May, 2024.

“We apply that the charge be read to the 1st and 2nd defendants (Binance and Gambaryan) in order to take their plea,” he prayed

But Binance’s Counsel, Mr. Chukwuka Ikwuazo (SAN), who also appeared for Gambaryan, opposed Ideho’s application that the fresh charge be read to his clients, arguing that the charge was just being filed (in the morning) and he was yet to see it in order to consult with his clients, so as to prepare for their defence.

Justice Nwite subsequently adjourned the matter until May 22 for arraignment.

The Judge had earlier, in a ruling, ordered the FIRS to serve the company (1st defendant) through Gambaryan (2nd defendant) the charge in the matter.

He held that Gambaryan, being the Binance Chief Financial Compliant Officer, ought to be served with the charge as the company’s representative in Nigeria in accordance with the law.

He discountenanced Ikwuazo’s argument that Gambaryan was neither a director, secretary or chief agent of the crypto-currency firm.

The court had fixed their arraignment for April 4, but could not proceed due to the inability of FIRS to effect service of the charge on the defendants, who are facing a four-count charge bordering on alleged tax evasion, in the charge, marked FHC/ABJ/CR/115/2024.

In the charge, dated and filed on March 22 by the FIRS, the defendants were alleged to have committed the offence on or about February 1, this year.

Count one alleged that while involved in carrying and offering services to subscribers on their platform, known as Binance, they failed to register with the FIRS for the purpose of paying all relevant taxes administered by the Service.

The offences are said to be punishable under Sections 8 and 29 of the VAT Act of 1993 (as Amended), Section 40 of the FIRS Establishment Act, 2007 (as amended) and under provisions of Section 94 of the Companies Income Tax Act (as amended), respectively.