The Nigerian government has detained Tigran Gambaryan, the Financial Crime Compliance Manager, and Nadeem Anjarwalla, the African Regional Manager of cryptocurrency exchange Binance, accusing the exchange of destabilizing the country’s currency. Binance has not been charged with any wrongdoing and its official statement states that it will continue to cooperate with the authorities to resolve the matter.
According to a recent report by The Wall Street Journal on March 14th, the family members of the detained Binance executives stated that they will remain in detention until at least the hearing scheduled for March 20th.
The Wall Street Journal recently reported on this incident, discussing the reasons behind Nigeria’s accusations and the current situation of the detained Binance executives.
Written by Patricia Kowsmann, Caitlin Ostroff, and Alexandra Wexler, The Wall Street Journal
Translated by Luffy, Foresight News
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Tigran Gambaryan, an American, is one of the two Binance employees detained in Nigeria
Binance’s Financial Crime Compliance Manager, Tigran Gambaryan, flew to the Nigerian capital to resolve an issue: the government of the country accused the world’s largest cryptocurrency exchange of causing the collapse of its currency.
The American, a former special agent of the US Internal Revenue Service, left his wife and children at home in Georgia with a small suitcase, preparing for what he expected to be a short business trip. But he has not returned since.
According to Gambaryan’s family, the Nigerian authorities have detained Gambaryan and his colleague Nadeem Anjarwalla, a British and Kenyan citizen who is also the African Regional Manager of Binance. The Binance employees are being held in a guarded house and have not been charged with any wrongdoing. The local government that invited them for the meeting has not publicly discussed the detention.
Nigeria, with a population of over 220 million, is the largest economy in Africa and has faced currency crises several times in the past. This is the first time that cryptocurrencies have played a major role.
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The value of cryptocurrencies in US dollars in sub-Saharan African countries
In recent years, Nigerians have flocked to cryptocurrencies to protect their savings from soaring inflation rates (reaching nearly 30% in January) and the impact of currency devaluation. Two-thirds of the local population live in poverty.
According to an index compiled by Chainalysis, Nigeria ranks second in cryptocurrency adoption worldwide, behind only India. Chainalysis claims that Nigerians received approximately $60 billion worth of cryptocurrency transactions in the 12 months leading up to June 2023.
Due to strict foreign exchange controls imposed by the local government, many residents sought refuge in digital currencies pegged to the US dollar (stablecoins).
Stablecoin trading has essentially become a black market, with the market exchange rate between the local currency, Naira, and the US dollar far lower than the official rate. According to currency traders, Binance is the most popular exchange and the preferred place to check the black market exchange rate.
Bayo Onanuga, a special adviser to the Nigerian President, accused Binance of interfering with Nigeria’s exchange rate determination and replacing the role of the central bank.
In a post on X, he wrote:
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Nadeem Anjarwalla, Binance’s African Regional Manager
The new government that came to power last year attempted to simplify the complex exchange rate system composed of various official exchange 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 value of the currency and the exchange rate on Binance’s website unacceptable.
Onanuga told The Wall Street Journal that Binance is cooperating with the authorities to discuss compensation for Nigeria.
Last week, after the detention incident occurred, Binance announced that it will suspend any services involving Naira, which has dealt a blow to its efforts to rebuild its business in the rapidly growing emerging market.
Restricting cryptocurrency websites
The Nigerian Communications Commission has ordered telecom companies to restrict residents’ access to 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 stated that, in the case of Binance, $26 billion flowed through Binance’s platform in Nigeria last year, and the central bank cannot fully identify the source and users of these funds. Cardoso did not disclose the source of this figure.
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The exchange rate of Naira to US dollar before and after the restriction of cryptocurrency websites by Nigerian authorities
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 stated that not all transactions are related to Naira, as users can exchange one cryptocurrency for another. He added that the total trading volume should not be mistaken for the actual funds flowing through the exchange.
The company stated in a blog post that Binance allows buyers and sellers to trade with each other, so it does not set prices. When Naira experiences severe volatility, the system automatically suspends trading to prevent manipulation. The company added that merchants attempting to manipulate the market will be expelled.
Binance was founded in China in 2017 and has repeatedly drawn the ire of the government. The company has been operating without a headquarters and under the scrutiny of regulatory authorities, offering unauthorized transactions through its global website.
In November, Binance founder Changpeng Zhao stepped down as CEO and admitted to violating US anti-money laundering requirements. The company agreed to pay a $4.3 billion fine, the largest ever imposed on a cryptocurrency company. Zhao is currently awaiting trial in the United States.
Last year, the Nigerian Securities and Exchange Commission stated that a local Binance entity was operating illegally and was ordered to cease operations. However, users can still access the global website, Binance.com.
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Street currency traders holding US dollars and Nigerian Naira; Source: Bloomberg News
The use of stablecoins pegged to the US dollar has surged in developing countries. In economies facing financial crises and experiencing a scarcity of actual US dollars, such as Turkey, Argentina, and Russia, locals have turned to cryptocurrency exchanges and the stablecoins they offer as an alternative.
Compliance with regulations
Binance CEO Richard Teng himself has previously worked for regulatory authorities and pledged 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 25th in response to an invitation from Nigerian government officials to hold 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 Ministry, and the Financial Intelligence Unit. Gambaryan and Anjarwalla’s families said that the meetings lasted for about two hours and they felt that progress was being made.
However, unexpectedly, they were later escorted back to their hotel, packed their bags, and taken to a guarded house. The Nigerian authorities did not provide any reasons.
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The exchange rate of Nigerian Naira to US dollar in recent years
During his time as a special agent of the US Internal Revenue Service, Gambaryan was involved in the case of the shutdown of cryptocurrency exchange BTC-e, which the US authorities accused in 2017 of facilitating criminal activities. He joined Binance in 2021.
Before joining Binance in 2022, Anjarwalla worked at a venture capital firm and Uber. In December of that year, he joined Binance as the Nigeria Regional Manager.
Anjarwalla’s wife, Elahe Anjarwalla, stated that a Nigerian court issued an order on February 28th, allowing the country’s Economic and Financial Crimes Commission to detain Gambaryan and Anjarwalla for two weeks pending investigation. She said that they and their families have not been informed about the nature of the investigation.
In the detained house, they are allowed to occasionally use their phones but are always under the supervision of guards.
Gambaryan’s wife, Yuki Gambaryan, stated that if her husband is allowed, she talks to him two to three times a day via text messages. She said that he is being brave for her and their two children, one aged 4 and the other 10.
Anjarwalla’s wife, Elahe, said that a housekeeper prepares his favorite green smoothie in the morning. He told her that he will do laundry soon. In this house, the men can watch TV and go to the balcony to smoke. Muslim Anjarwalla began his fasting for Ramadan on Monday, and Gambaryan joined him.
When allowed, Anjarwalla video calls Elahe. They do not discuss any sensitive matters but try to calm each other down. He talks to his 11-month-old son, who is starting to learn to say “dadadada.” His first tooth is coming out, and next week is his first birthday.
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Central Bank of Nigeria headquarters in Abuja, Nigeria; Photo source: Bloomberg News
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