The Federal High Court in Abuja, on Tuesday, ordered the freezing of the bank accounts of Bamboo, Risevest, and four other online investment platforms for 180 days.
Affected by the court order are Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Bamboo Systems Tech. Ltd OPNS, Chaka Technologies Limited, CTL/Business Expenses and Trove Technologies Limited.
Some of the fintech firms are principally owned by individuals and organisations based in the United States of America, the court was told.
The court issued the freezing order following a request by the Central Bank of Nigeria (CBN), which accused the firms of using the foreign exchange sourced from the Nigerian market for purchasing foreign bonds/shares in contravention of its directive issued in July 2015.
Accusing the firms of operating without licences as asset management companies, the central bank alleged that the firms violated its directive contained in its circular referenced TED/FEM/FPC/GEN/01/012 and dated July 1, 2015.
CBN’s lawyer, a former Attorney-General of the Federation, Michael Aondoakaa, filed an ex parte motion at the Federal High Court in Abuja on August 4, 2021, seeking temporary freezing of the bank accounts of the firms pending further investigations.
Mr Aondoakaa, a Senior Advocate of Nigeria (SAN), 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.
He said there was the need to block 15 accounts of the firms for 180 days to stop the firms from moving their funds out of Nigeria.
“We need to write the embassy, we need to go to the Foreign Affairs, the minister will serve the U.S. to seek assistance so that we can block these linkages,” the lawyer added.
He, therefore, sought an interim order empowering 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 his ruling on the motion, Mr Mohammed granted the prayers of the applicant as prayed.
He however added that the defendants were at liberty to challenge the freezing order by approaching the court within the stipulated period.
The judge subsequently adjourned the matter till February 20, 2022, which is about the time the six months freezing order will lapse.
Case against forex firms
The CBN provided some details of its case against the six forex trading firms in an affidavit filed in support of its ex parte application.
A senior supervisor of the CBN, Christiana Gyang, who deposed to the affidavit, said the apex bank had reviewed the activities of the defendants to determine their alleged involvement in illegal foreign exchange (FX) dealings.
She stated that investigation showed that the platforms were violating Nigeria’s trading laws including dealing in cryptocurrency in contravention of the CBN policy.
Concerning Rise Vest Technologies Limited, the affidavit stated that it was incorporated in October 2019 with objects of technological and business consultancy.
“The shareholders of the company at incorporation were Eke Eleanya Urum and Rise Vest Technologies Limited (USA). The company partners with companies involved in payments and settlements as well as internal and international remittances.
“However, information on the company’s website indicated that it is an asset management company, which provides a platform for customers to invest in foreign instruments using an app called ‘Risevest’.
“Our review revealed that the company consummated its asset management activities through its account 1017556580 with Zenith Bank Plc, which recorded a turnover of 1.97 billion between January 1, 2019 and April 27, 2021.”
It added that the inflows to the account were mainly from retail investors through two Payment Service Solution Providers – Flutterwave (588.61 million) and Monnify (N967.58 milllon).
The firm’s outflows from the account were to a PSSP – Paystack (N500 milllon) and cryptocurrency traders like BuyCoins (N110 millon) and Beitium Venture (N350 million).
“Inquiries on the transactions confirmed that the transfers to BuyCoins were for the purchase of cryptocurrency,” the affidavit stated, adding that findings showed that “Rise Vest Technologies Limited traded in cryptocurrencies in contravention of the CBN circular referenced BSD/DIR/PUB/LAB/014/001, dated February 5, 2021.”
The CBN also said Bamboo Systems Technology Limited is owned by US-based Bamboo Global LLC (99.99 per cent share) and Oluwole Ralph Olugbenga (0.01 per cent).
“The company was incorporated in December 2018 to carry on the business of software design, implementation, development, maintenance and consultancy amongst others. It is related to One Global Med. Technology, BSTL Lambeth and Grag Concepts Limited.
“Further reviews showed that Bamboo Systems Technology Limited operates an online App, ‘Bamboo’, that provides a medium for investors to buy and sell stocks, exchange traded funds (ETFs), Index funds and derivatives listed in major exchanges in the U.S.”
Bamboo, Risevest react
The six fintech firms have become increasingly popular, particularly among young urban Nigerians, allowing them to invest in foreign stocks and bonds, with experts saying they have increased financial inclusion in the country.
At least two of the firms have reacted to the ruling, saying they will work with regulators to resolve the concerns.
Bamboo and Risevest responded to the court’s decision Tuesday, assuring their customers that their investments were safe.
“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,” Bamboo told its clients.
Also, Risevest said: “About 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 our U.S operations remain intact.
“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.”