Earlier this month, the Federal Government of Nigeria filed a criminal lawsuit against four Nigerian crypto traders—Ejiogu A. Chinedu, Nnamdi F. Okereke, Oty Ugochukwu Stanley, and Chukwuebuka F. Ogumba—and some firms for conducting business, including USDT and Naira trades, effectively as financial institutions without a valid banking license.

As per the fillings, as exclusively obtained and reported by Nairametrics, the government believes that the charged defendants, through their business transactions, have violated the Banks and Other Financial Institutions Act of 2020 and are seeking the Federal High Court in Abuja—the nation's capital—to dispense the appropriate punishment.

Brief Background

This court case is off the heels of the Nigerian Economic and Financial Crimes Commission (EFCC) investigation into alleged activities via several bank accounts of individuals using digital assets exchanges to manipulate the Naira's value and launder proceeds from these activities.

The EFCC filed a motion to freeze the identified accounts pending the conclusion of their investigation. The court later granted an interim order that saw over 1,00 accounts listed in the commission's motion on April 24 frozen for over ninety days. These accounts held over N548.6 million, or roughly over $330,000 as of writing.

The charged parties were able to get their request to lift several freezing orders granted by the court. However, that was short-lived, as the commission filed a new motion to freeze these accounts until the conclusion of their investigation, which the court granted on September 4, after they had also separately filed criminal charges against the alleged operators of the accounts in question.

Details Of the Nigerian Government Lawsuit

In the case filed by the Nigerian government, the prosecution is stating that the defendants—the crypto traders—in engaging in their business activities did so without being authorized dealers in Nigeria's Autonomous Foreign Exchange Market (AFEM) where allegedly publicly negotiating USDT to Naira rates, and thereby being in breach of Section 29(1)(c) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act—which is an act that criminalizes any foreign exchange negotiation not permitted by the law.

Additionally, according to filings from the government in June and July, the defendants stand accused by the Nigerian government of engaging in business activities without a valid license all the way back from 2021 to January 2024.

Nevertheless, this is an ongoing court case, with legal teams from both sides making their case, accordingly. It remains unclear what the duration of this case will be, but it is safe to say we can expect it to go on for quite a while before the High Court makes a final decision.

Consequences Of This Lawsuit

The Nigerian government’s lawsuit could set a chilling precedent for those providing P2P OTC services to be considered requiring a banking license to facilitate USDT and Naira trades or be deemed engaging in illicit activities with the judgment of this case—should the defendants be found guilty—serving as the base penalty.

Further, with Nigeria ranking as one of the top adopters and users of both USDT and Bitcoin according to data from Chainalysis, it'll no doubt further exacerbate the operating climate for digital assets businesses.

Nigerian Government Sentiment On Bitcoin & Stablecoins

These developments are no surprise for those following the regulatory landscape in Nigeria. On the one hand, the Nigerian government is attempting to balance doing all it can to defend the Naira as it continues to plunge against the US Dollar and protect consumers and investors, and on the other hand trying to create an enabling environment for the digital assets space to thrive.

However, until and unless there is a distinction between Bitcoin and the more wider space, we are likely to see more of these sorts of developments unfold.

We will have to wait and see how this lawsuit and other developments in the regulatory environment progress. Suffice it to say, it is not all doom and gloom. Now is the time for relevant stakeholders to constructively engage regulators to come to a more favorable position for all parties, government inclusive.