A US district court has ordered the forfeiture of $125,000 in cryptocurrency, recovered from three Nigerians, after it was stolen from an American victim.
The judgement was delivered by the Eastern District of Tennessee in Chattanooga in the US on 30 April, following months of waiting on the Nigerians to come forward to claim the assets.
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The assets were seized from three Binance accounts linked to the Nigerian citizens – Martins Eromosele Iyere, Moses Olumide Sokale, and Olawumi Stephen Adewale – a copy of the judgement obtained by PREMIUM TIMES shows.
According to the court’s ruling, the cryptocurrency assets were stolen in 2021 from a Tennessee resident, Matthew McNulty.
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Mr McNulty was tricked into entering his login information into a fraudulent website hosted in Nigeria. The scammers then quickly transferred his cryptocurrencies out of his wallet.
FBI Agent Jordan Foreman said in an affidavit filed in support of the US government’s request that he traced the stolen funds using “open-source methods”.
According to him, he found out that the assets were converted into different types of cryptocurrencies and transferred to various wallets before ultimately ending up in the Binance accounts.
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“The pattern of withdrawals, transfers, and transactions is consistent with money laundering and attempts to conceal proceeds of fraud,” Mr Foreman stated.
The court held that the government’s evidence established a clear link between the seized assets and the alleged wire fraud and money laundering.
As no claims were filed disputing the government’s allegations, the judge, Travis McDonough, gave a summary judgement in favour of the US government last month, paving the way for the forfeiture of the assets.
How the alleged fraud happened
According to the government’s filings, Mr McNulty, a resident of Cleveland, Tennessee, posted a query on a Telegram channel called AnySwap on 12 February 2021, asking for help with a cryptocurrency trading error.
FBI Agent Foreman, wrote in the affidavit accompanying the government’s filing, that an account impersonating a real Telegram community manager reached out to Mr McNulty, offering to help. The scammer directed Mr McNulty to enter his cryptocurrency login information into a website registered and hosted in Nigeria.
Mr Foreman said the website generated a QR code after Mr McNulty entered his credentials. The scammer then asked Mr McNulty to screenshot the QR code and send it to him. After the victim complied, the scammer swiftly transferred his cryptocurrencies out of his wallet.
The stolen funds were subsequently laundered through various wallets and converted into different types of cryptocurrencies before being transferred to Binance accounts linked to Nigerian nationals Messrs Iyere, Sokale and Adewale, US detectives said.
Binance is an online cryptocurrency exchange that allows users to buy and sell cryptocurrency.
The crypto platform was popular among Nigerians dealing in cryptocurrency until it started having a run-in with the Nigerian government led by the new administration of President Bola Tinubu in 2023.
The Nigerian government subsequently arrested two Binance executives, one of whom escaped from custody, while the other, Tigran Gambaryan, was prosecuted for months from detention.
On 23 October 2024, Nigeria dropped criminal charges against Mr Gambaryan and freed him, enabling him to return to the US.
But Binance continues to face charges of tax evasion at the federal court in Abuja.
No response
The US government said it seized the crypto assets from Mr McNulty on 18 April 2022.
But it said every effort to contact Messrs Iyere, Sokale and Adewale, including sending them emails, over the seizure and forfeiture proceedings was unsuccessful.
“The government also posted a notice of forfeiture for 30 days on www.forfeiture.gov. No answers and verified complaints were timely filed and on 27 September 2024, the government moved for summary judgement. The government’s motion is now ripe,” the judge, Mr McDonough, stated before granting an order of forfeiture of the assets in favour of the US government.
Cryptocurrency fraud
The decentralised nature of cryptocurrency has made it the prime choice of criminals looking to defraud their unsuspecting victims. The speed of irreversible transactions and the ability to transfer value around the world make it easy for criminals to move digital currency into an account and cash out.
READ ALSO: Binance executive Tigran Gambaryan’s healthcare journey in Nigeria: What the records show
According to a 2024 report by the FBI’s Internet Crime Complaint Center (IC3), losses related to cryptocurrency fraud totaled over $5.6 billion in 2023, a 45 per cent increase from 2022.
In April, hundreds of Nigerians were scammed of over N1.3 trillion by Crypto Bridge Exchange (CBEX).
CBEX had presented itself as a global digital asset trading platform that allowed users to trade cryptocurrencies and earn high investment returns. With a promise of 100 per cent Return on investment, many Nigerians fell for the scam.
However, a closer look at the company’s activities indicates that it ran a Ponzi scheme.
Nigerian authorities have repeatedly cited cryptocurrency’s high vulnerability to money laundering and other criminal activities as the reason for their cautious and slow embrace of it.
After years of outright ban, the government cautiously opened up its market in April this year, officially classifying cryptocurrencies and other virtual assets as securities for the first time.
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