Nigeria’s Central Bank cracks down on fintech startups

The Central Bank of Nigeria (CBN) has been given the greenlight by a Federal High Court in Abuja to freeze the accounts of Nigerian investment-tech companies Bamboo, Chaka, Risevest and Trove.

The order is limited to six months pending investigations to be carried out by the bank.

CBN had sought temporary freezing of the bank accounts belonging to these platforms, alleging that they were operating without licenses as asset management companies and utilizing foreign exchange from the Nigerian market for purchasing foreign bonds and shares, in contravention to a CBN circular issue of July 1, 2015.

In June 2021, Chaka became the first investment tech company to secure Nigeria’s Securities and Exchange Commission’s (SEC) digital stock trading license. Although Asset Management companies are ordinarily within the purview of SEC, it appears CBN is bringing this suit under its regulatory powers regarding foreign exchange.

Meanwhile, Risevest, another company whose accounts has been frozen, has been accused of trading in cryptocurrencies, a move that was banned by the apex bank in February.

Overall, all four companies are alleged to have contributed to the Naira’s weakness to the U.S. Dollar through the foreign exchange deals they carried out individually. As such, the Central Bank sought the freeing of 15 accounts owned by these platforms, court submissions indicate.

The companies offer foreign stocks to Nigerians by operating with licensed brokers in Nigeria and the U.S. Bamboo, Chaka and Trove work with Drivewealth Capital, a U.S.-based broker regulated by the U.S. Securities and Exchange Commission, to offer foreign stocks.

Risevest uses third party partnerships to offer foreign stocks.

As a result of the central bank crackdown, these companies are likely to have their internal operations crippled, making bill and salary payments a bit more complicated.

So far only two companies have reacted to the announcement. Bamboo has informed users in a tweet that their money remains safe and accessible.

Eleanya Eke, Risevest’s CEO, also came out on Twitter to assure users that trading activities continue as usual. The company has also sent out an official email to its users.

The accounts freezing order allows any aggrieved party to approach the court within the period to seek redress.

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