Cryptocurrency firm Binance offered Nigeria a down payment of $5 million as part of its four-year tax liability to the West African nation as it scrambled to secure the release of its detained executive last year, this newspaper can authoritatively report today.
The company made the offer in August 2024 as it frantically negotiated the release of Tigran Gambaryan, its head of financial crimes compliance.
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Mr Gambaryan was detained in Nigeria on 26 February 2024 for failing to cooperate with law enforcement agencies investigating how crypto exchange firms, including Binance, sabotaged the Nigerian economy and caused substantial financial loss. He was released on humanitarian grounds last October, but cases against Binance continue.
Nigeria said Binance illegally offered financial services in its territory without the necessary licences, conducted operations without the required permits, failed or refused to comply with the country’s Money Laundering Act and provided speculative services without authorisation.
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The West African nation also said Binance’s peer-to-peer market distorted the country’s price discovery mechanisms by allowing sellers to set arbitrary prices, thereby disrupting the foreign exchange market.
In addition, Nigeria claimed Binance’s illegal operations heightened volatility in the foreign exchange market, deterred foreign investment, increased capital outflows, and diverted import payments from regulated channels due to the company’s peer-to-peer marketplace.
In a letter to the Office of the National Security Adviser dated 24 February, the cryptocurrency firm admitted that it illegally operated in Nigeria for six years without registering with relevant agencies. The company also confessed that as of early 2024, it had at least 386,256 active users in Nigeria, with a trade volume of at least $21.6 billion and net revenue of $35.4 million in the calendar year 2023 alone.
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After taking Mr Gambaryan and Nadeem Anjarwalla, the African regional manager at the crypto exchange platform, into custody on 26 February 2024, Nigeria asked Binance to settle its tax liability for four years (2020-2023) while also paying 10 per cent interest per annum on the unpaid tax dues. The company has so far failed to comply.
However, at a negotiation meeting in early August 2024, Binance claimed it generated $35.4 million in revenues in 2023. It said its total revenue from Nigeria for four years (2020-2023) could not be more than $140 million. It then computed its total tax liability to be around $7 million.
At a meeting facilitated by its counsel, Arnold & Porter, the company offered to make a down payment of $5 million. It said the amount would be paid into an escrow account and only released to Nigeria after Mr Gambaryan’s release and departure from Africa’s most populous country.
Binance also agreed to negotiate further the possibility of providing Nigeria with a list of the top 100 Nigerian users of its platform while also hiring two firms, Baker Tilly (accountants) and Chainalysis (blockchain experts), to help determine the company’s exact tax liability to Nigeria.
However, Nigeria considered the $5 million offer ridiculous and asked its lawyers, White & Case LLP, to reject it outright, saying it was not a good faith settlement offer.
Nigeria became especially miffed when a lawyer on the Arnold & Potter team reportedly suggested that Mr Gambaryan was being held hostage in Abuja and that the U.S. government would be pressured to take retaliatory measures against Nigeria. Abuja immediately called off the negotiation.
“When you calculate the volume of trade and losses to our economy, we actually should be asking for more,” an official close to the matter said. “We also need to emphasise our request for data. Without the requested data, Nigeria cannot calculate the volume of trade, let alone taxes owed by Binance. In the US, the company surrendered the requested data; why is Nigeria different? They (Binance) just felt we do not deserve much as a third-world country.”
Nigeria is now battling Binance in two separate court cases. One is a $35.4 million money laundering case brought by the EFCC in which Mr Gambaryan and Anjarwalla are no longer defendants. The charges were amended on 25 November 2024, about a month after the American cryptocurrency expert was freed.
In count one, Binance was accused of conspiring to carry on the specialised business of other financial institutions without a valid licence, contrary to Section 97 of the Penal Code Act.
In count three, the company is alleged to have engaged in the business of other financial institutions (other than insurance, stock broking, and pension fund management) without a valid licence and thereby committed an offence contrary to and punishable under Section 58(5) of the Banks and Other Financial Institutions Act, 2020.
Count four accused the defendant of using its virtual asset services platform to unlawfully negotiate foreign exchange rates in Nigeria, even though it was not an authorised dealer in Nigeria’s Autonomous Foreign Exchange Market. The offence is contrary to and punishable under Section 29(1) (c) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.
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In count five, Binance is accused of concealing the origin of the proceeds of its unlawful activities and thereby committing an offence contrary to section 21 (a) and punishable under section 18(3) of the Money Laundering (Prevention and Prohibition) Act, 2022.
In count six, the company was alleged to have concealed the origin of a cumulative $35.4 million in revenue it admitted generating in Nigeria in 2023, an offence contrary to and punishable under Section 18(3) of the Money Laundering (Prevention and Prohibition) Act, 2022.
In another case, the Nigerian government, through the Federal Inland Revenue Service (FIRS), filed a lawsuit against Binance Holdings Limited on 19 February, seeking $79.51 billion and ₦231 million in compensation for alleged economic losses caused by the cryptocurrency exchange company’s operations in Nigeria.
The lawsuit, filed at the Federal High Court in Abuja, also demands $2.001 billion in income taxes for 2022 and 2023. Binance and its executives, Messrs Gambaryan and Anjarwalla, are accused of contravening Nigerian laws, including failing to register with FIRS for tax compliance and allegedly causing economic losses to the country.
The FIRS alleges that Binance concealed its business activities in Nigeria despite having a significant economic presence there. The company is also accused of breaching Nigeria’s Companies Income Tax Act, the Federal Inland Revenue Service (Establishment) Act 2007, and other regulatory frameworks.
An affidavit revealed that Binance had been operating in Nigeria for over six years without registration. Its platform had 386,256 active Nigerian users, a trading volume of $21.6 billion, and a net revenue of $35.4 million for 2023.
The suit by FIRS contains several prayers, including:
– Declaration of Tax Liability: A declaration that Binance is liable to pay annual corporate income tax for having a significant economic presence in Nigeria.
– Income Tax Returns. An order compelling Binance and its executives to file income tax returns for 2022 and 2023.
– Tax Payment: An order compelling Binance to pay $2.001 billion in taxes for 2022 and 2023, along with penalties and interest.
– Compensation for Economic Losses: Compensation of $79.51 billion and ₦231 million for economic losses.
– Penalties, including 10% annual interest and a 26.75% CBN lending rate, until the taxes are fully paid.
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