Nigerian Crypto Investors Face Account Freezing
Rebeca Moen Mar 30, 2023 08:09
Nigerian crypto investors using P2P services are concerned about the Central Bank of Nigeria (CBN) flagging their bank accounts due to their connection to the Flutterwave hack. The situation has discouraged P2P users from using OTC markets, causing businesses to crumble and possible legal repercussions.
Nigerian crypto investors using peer-to-peer (P2P) services are facing difficulties as the Central Bank of Nigeria (CBN) has flagged their bank accounts. The CBN's decision is believed to be in relation to the recent Flutterwave hack, which saw almost $6.5 million (3 billion nairas) illegally transferred from the accounts of the Nigerian fintech company.
On February 27th, a motion ex-parte was filed and granted in support of Flutterwave's claims, resulting in 107 accounts being put on lien/Post-No-Debit (PND), including their fifth beneficiaries. While the bank accounts have yet to be proven affiliations with the hack, some locals have confirmed that their accounts have been frozen in connection to the incident.
The situation has discouraged P2P users from using over-the-counter (OTC) markets, which allow trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator. The hacked sum flowed into the Nigeria crypto market on different OTCs, and users now have problems with financial intermediaries when they want to use P2P services for crypto transfers.
Investors worldwide use P2P as a medium of direct exchange of crypto between parties without the involvement of a central authority. They may choose to swap cryptocurrencies for cryptocurrencies or crypto for cash. In 2021, the CBN announced a regulation that prevented financial institutions like banks from enabling crypto use. However, Nigerians were able to find a way forward and still maintain their leading position as the largest crypto hub of Africa through the use of P2P platforms.
Some community members believe that this situation could affect the general interest of Nigerians who are yet to join the crypto digital ecosystem in acquiring digital assets. The situation is causing some businesses to crumble as unsuspecting entrepreneurs have received payments for their services with funds that were allegedly linked to the hacked amount, resulting in confusion and possible legal repercussions.
Despite strict crypto regulations by the CBN, the P2P market has aided Nigerian trade. However, a financial analyst known as Sadeik calls it a black market hub for scammers laundering fraud funds. Sadeik went on to say that a friend of his lost more than 500,000 nairas because the person he transacted with had his account flagged in the Flutterwave hack.
In an official statement, Flutterwave denied the hack and stated that it identified an unusual trend of transactions on some users' profiles and immediately launched a review in line with its standard operating procedure. The review revealed that some users who had not activated some of their recommended security settings might have been susceptible. Flutterwave was able to address the issue before any harm was done to its users.
The current situation highlights the need for increased security measures and awareness in the Nigerian crypto market. The CBN's decision to flag accounts highlights the importance of financial institutions' role in combating fraudulent activities. It also emphasizes the importance of financial intermediaries, such as banks, in ensuring that funds are not used for illegal purposes. The incident serves as a reminder for crypto investors to take necessary precautions and to only use reputable P2P platforms.
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