Nigeria Holds Binance Executive Amid Currency Crisis Blame Game?

Original Article Title: Crypto Gets Blamed for a Real-Life Currency Crisis

Original Article Authors: Patricia Kowsmann, Caitlin Ostroff, Alexandra Wexler, The Wall Street Journal

Tigran Gambaryan, Binance's Head of Financial Crime Compliance, Image Source: CONSENSUS/SHUTTERSTOCK

Binance's Head of Financial Crime Compliance, Tigran Gambaryan, had flown to Nigeria's capital hoping to address an issue: The government accused the world's largest cryptocurrency exchange of causing the nation's currency to collapse. The U.S. citizen, who previously served as a special agent with the Internal Revenue Service (IRS), left his home in late February this year with only a small suitcase, thinking it would be a brief business trip. His wife and children remained at their home in Georgia.

He never returned.

According to Gambaryan's family, Nigerian authorities detained Gambaryan and his colleague, Nadeem Anjarwalla, a British and Kenyan citizen who is also Binance's Africa regional manager.

The Binance employees are being held in a guarded house and have not been charged with any crime. The local government that invited them to Nigeria for a meeting has also not publicly discussed the detention.

Nigeria, Africa's largest economy with a population of over 220 million, has faced currency crises multiple times in the past. However, this is the first time cryptocurrency has taken center stage.

Value of the U.S. Dollar exchanged to cryptocurrency trading across Sub-Saharan African countries

In recent years, Nigerians have flocked to cryptocurrency to shield their savings from soaring inflation rates (reaching nearly 30% in January) and the impacts of currency devaluation. Two-thirds of the local population live in poverty. 

According to an index compiled by Chainalysis, the country has the world's second-highest cryptocurrency adoption rate, second only to India. Chainalysis stated that Nigerians received approximately $60 billion in cryptocurrency transactions in the 12 months leading up to June 2023.

Due to strict foreign exchange controls by the local government, many residents have sought refuge in dollar-pegged digital currencies (dollar stablecoins).

Stablecoin transactions have essentially turned into a black market, with the market exchange rate between the local currency, the Naira, and the US dollar far below the official government rate. According to currency traders, Binance is the most popular exchange and has become the preferred destination to check the black market exchange rate.

Nigeria's Special Presidential Advisor, Bayo Onanuga, has accused Binance of interfering with Nigeria's exchange rate determination and usurping the role of the central bank.

In a post on X, he wrote, "Our country should ban cryptocurrency, otherwise our currency outflow will continue to rise."

Nadeem Anjarwalla, Binance's manager for Africa. Image source: ELAHE ANJARWALLA

The newly elected government last year attempted to simplify the complex exchange rate system composed of multiple official rates and give market forces greater influence over the currency's value.

However, it turned out that the government found the persistent gap between the currency value and the rate on the Binance website intolerable.

Onanuga told The Wall Street Journal that Binance is cooperating with authorities to discuss compensation for Nigeria.

Following the detention incident last week, Binance announced it would halt any services involving the Naira, dealing a blow to its efforts to rebuild its business in the rapidly growing emerging market.

Restrictions on Cryptocurrency Websites

The Nigerian Communications Commission has instructed telecommunications companies to restrict residents' access to the Binance and other cryptocurrency platforms' websites.

Olayemi Cardoso, the Governor of the Central Bank of Nigeria, stated that cryptocurrency platforms are being used to manipulate the market.

He said that, for Binance, last year saw $26 billion flow through Binance's Nigerian platform, with the source and users of these funds not being fully identifiable by the central bank. Cardoso did not disclose the source of this figure. 

Data Source: Nigerian Autonomous Foreign Exchange Market (Official Rate); abokiFX (Parallel Rate)

A Binance spokesperson stated that the company requires all users to undergo strict identity verification. While he did not comment on the $26 billion figure, he mentioned that not all transactions are related to the Naira as users can exchange one cryptocurrency for another. He added that the total trading volume should not be mistaken for actual funds flowing through the exchange.

He said: "We are working with Nigerian authorities to safely bring Nadeem and Tigran back home to reunite with their families." "We believe this matter will be resolved quickly."

The company stated in a blog post that Binance allows buyers and sellers to trade with each other, hence no set prices. When the Naira experiences severe fluctuations, the system automatically pauses to prevent manipulation. The company added that merchants attempting to manipulate the market will be kicked out.

The Nigerian Securities and Exchange Commission stated last year that a local Binance entity was operating illegally and was ordered to cease services. However, users can still access the global website Binance.com.

In developing countries, the use of USD stablecoins has surged. In economies facing financial crises and a scarcity of actual USD, such as Turkey, Argentina, and Russia, locals have turned to cryptocurrency exchanges and their USD stablecoin offerings as an alternative.

Compliance

Binance CEO Richard Teng himself has held positions in regulatory agencies, and when he took over last year, he vowed to comply with regulations and engage with government authorities.

According to their families, 39-year-old Gambaryan and 37-year-old Anjarwalla arrived in the Nigerian capital, Abuja, on February 25 at the invitation of Nigerian government officials, who requested a series of meetings. 

The next day, the two met with officials from the Central Bank of Nigeria, the Securities and Exchange Commission, the National Security Agency, and the Financial Intelligence Department. Gambaryan and Anjarwalla's families said the meeting lasted about two hours, and they felt progress was made. 

However, to their surprise, they were later escorted back to the hotel, packed their bags, and taken to a guarded house. The Nigerian authorities did not provide any reasons. 

How much is 1 US dollar to Nigerian Naira

During his time as a special agent for the IRS, Gambaryan was involved in the case of the shutdown of the cryptocurrency exchange BTC-e, which U.S. authorities accused in 2017 of aiding criminal activities. He later joined Binance in 2021.

Anjarwalla, before joining Binance in 2022, had worked at a venture capital firm and Uber. In December of that year, he joined Binance as the Nigeria country manager.

Anjarwalla's wife, Elahe Anjarwalla, stated that on February 28, a Nigerian court issued an order allowing the country's Economic and Financial Crimes Commission to detain Gambaryan and Anjarwalla for two weeks pending investigation. She said they and their families have not been informed of the nature of the investigation.

While in the detention house, they are allowed occasional use of their phones but are constantly monitored by guards.

Gambaryan's wife, Yuki Gambaryan, mentioned that if allowed, she would communicate with her husband via text messages two to three times a day. She said he has been brave for her and their two children, aged 4 and 10.

"My youngest child asks every day when his dad is coming home, often goes to Tigran's home office because it smells like dad," she said.  

Anjarwalla's wife, Elahe, shared that a housekeeper makes Anjarwalla his favorite green juice smoothie in the morning. He told her he's about to do laundry soon. In this house, the men can watch TV, go to the balcony to smoke. Anjarwalla, a Muslim, started fasting for Ramadan on Monday, and Gambaryan joined in.

During permitted times, Anjarwalla video calls his wife in Nairobi. They do not discuss any sensitive topics but try to comfort each other. He talks to his 11-month-old son, who has started babbling "dad." The baby's first tooth is coming out, and his first birthday is next week.

Elahe said, "I hope and pray that they can come back before their son's birthday."

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