Nigeria Files Criminal Lawsuit Against Crypto Traders for Unlicensed USDT and Naira Transactions

Earlier this month, the Federal Government of Nigeria took a significant step. They filed a criminal lawsuit against four Nigerian crypto traders: Ejiogu A. Chinedu, Nnamdi F. Okereke, Oty Ugochukwu Stanley, and Chukwuebuka F. Ogumba. These individuals, along with some companies, are accused of trading USDT and Naira without a valid banking license.

The government believes that these traders violated the Banks and Other Financial Institutions Act of 2020. They’re asking the Federal High Court in Abuja to impose the appropriate penalties.

This lawsuit follows an investigation by the Nigerian Economic and Financial Crimes Commission (EFCC). They looked into various bank accounts linked to individuals using digital assets to manipulate the Naira's value and launder money. The EFCC has already filed a motion to freeze these accounts while they continue their investigation.

On April 24, the court granted an interim order, freezing over 1,000 accounts. These accounts held more than N548.6 million, which is roughly $330,000. The charged parties managed to lift some of the freezing orders temporarily. However, the EFCC quickly filed a new motion to freeze the accounts again, which the court approved on September 4.

In the lawsuit, the prosecution claims that the defendants acted without authorization in Nigeria's Autonomous Foreign Exchange Market (AFEM). They allegedly negotiated USDT to Naira rates publicly, which breaches Section 29(1)(c) of the Foreign Exchange Act. This act makes unauthorized foreign exchange negotiations illegal.

Additionally, the government’s filings indicate that the defendants have been conducting these unlicensed activities since 2021, continuing until January 2024.

This case is still ongoing. Legal teams from both sides are presenting their arguments. It’s hard to predict how long it will take for the High Court to reach a final decision.

The Nigerian government’s lawsuit could set a precedent for those offering peer-to-peer (P2P) over-the-counter (OTC) services. If the defendants are found guilty, it may mean that others will need a banking license to trade USDT and Naira.

Moreover, Nigeria is one of the top users of both USDT and Bitcoin, according to Chainalysis. This situation could make it even more challenging for digital asset businesses to operate.

These developments are not surprising for those following Nigeria's regulatory landscape. The government is trying to defend the Naira as it continues to decline against the US Dollar while also protecting consumers and investors. They want to create a favorable environment for digital assets to thrive.

However, until there’s a clear distinction between Bitcoin and the broader digital asset market, we may see more regulatory actions like this one. It will be important to watch how this lawsuit and other regulatory changes unfold. There’s potential for constructive engagement between stakeholders and regulators, which could lead to a better situation for everyone involved.