“Tigran Gambaryan, Binance’s head of financial-crime compliance, flew to Nigeria’s capital to solve a problem: The government had blamed the world’s largest crypto exchange for crashing the currency.
The American, a former Internal Revenue Service special agent, left his wife and children at home in Georgia in late February with a small suitcase for what he thought was a quick business trip. He hasn’t come back.
Nigerian authorities detained Gambaryan and a colleague, Nadeem Anjarwalla, a U.K. and Kenyan national and Binance’s regional manager for Africa, according to the men’s families.
The Binance employees, who are being held in a guarded house, haven’t been charged with any crimes. The government, which invited them to Nigeria for meetings, hasn’t publicly discussed the detentions.
Nigeria, Africa’s largest economy with a population of more than 220 million, has faced many currency crises before. This is the first time that crypto has played a starring role.
Nigerians flocked to cryptocurrencies in recent years to shelter their savings from a soaring inflation rate, which hit nearly 30% in January, and a plunging currency, one of the worst-performing in the world this year. Two-thirds of the population lives in poverty.
The country has the second-highest adoption of crypto in the world, after India, according to an index compiled by Chainalysis, a data provider. Nigerians received about $60 billion worth of crypto transactions in the 12 months through June 2023, according to Chainalysis. Because the government rationed who could exchange the local currency for the dollar and at what exchange rate, many sought refuge in digital currencies pegged to the U.S. dollar, known as stablecoins.
The stablecoin trade in essence became a black market, displaying an unofficial exchange rate between the local currency, the naira, and the dollar that was much weaker than the government’s rates. Binance, the most popular exchange, became the go-to place to check that black-market rate, according to currency traders.
Bayo Onanuga, a special adviser to the Nigerian president, accused Binance of setting the exchange rate for Nigeria and hijacking the role of the central bank.
“Crypto should be banned in our country or else this bleeding of our currency will continue unabated,” he wrote in a post on X.”
“A new government that came to power last year attempted to simplify Nigeria’s complex system of multiple official exchange rates and grant more influence to market forces over the currency’s value.
However, a persistent disparity between the government’s valuation of the currency and the rate displayed on Binance’s website became untenable. Bayo Onanuga, speaking to The Wall Street Journal, stated that Binance was cooperating with authorities, and discussions regarding compensation to Nigeria were underway.
Following the detentions of Binance employees, the company announced it would cease all services involving the Nigerian naira, dealing a significant blow to its efforts to expand business in emerging markets.
Website Shutdown:
The Nigerian Communications Commission instructed telecom companies to block access to the websites of Binance and other crypto platforms.
Olayemi Cardoso, head of Nigeria’s central bank, implied that crypto platforms were being exploited to manipulate the market.
Regarding Binance, Cardoso mentioned that $26 billion had flowed through its platform in Nigeria over the past year from sources and users not adequately identified by the central bank. However, he did not specify the source of this figure.
A Binance spokesperson stated that the company mandates rigorous identity verification for all users. While not addressing the $26 billion figure directly, the spokesperson emphasized that not all trading on the platform involves the naira, as users can exchange one cryptocurrency for another. The spokesperson stressed that total trading volume should not be confused with actual money transactions on the exchange.
Binance asserted that it merely facilitates trading between buyers and sellers and does not dictate prices. During significant naira volatility, the system automatically halts to prevent manipulation, and those attempting to manipulate the market are expelled.
Founded in 2017 in China, Binance has faced scrutiny from governments in the past. Operating without a fixed headquarters and evading regulators, it provided unlicensed trading via its global website.
In November, Binance’s founder, Changpeng Zhao, stepped down as CEO and pleaded guilty to violating U.S. anti-money laundering regulations. The company agreed to a record $4.3 billion in fines. Zhao awaits sentencing in the U.S.
In Nigeria, the securities regulator declared last year that a local Binance entity was operating unlawfully and ordered it to cease its services. Nevertheless, users retained access to the global site, Binance.com.”
“The usage of cryptocurrencies pegged to the U.S. dollar has surged in developing countries facing financial strain, such as Turkey, Argentina, and Russia. In these economies, where physical U.S. dollars are scarce, locals are turning to crypto exchanges and dollar-like digital currencies as an alternative.
Playing by the rules:
Binance’s CEO, Richard Teng, a former regulator, pledged to abide by regulations and cooperate with government authorities upon assuming office last year.
Events in Nigeria:
Tigran Gambaryan, 39, and Nadeem Anjarwalla, 37, arrived in Abuja, Nigeria’s capital, on February 25, at the invitation of government officials for a series of meetings.
Following discussions with officials from Nigeria’s central bank, securities regulator, national-security arm, and financial-intelligence arm on the following day, Gambaryan and Anjarwalla felt progress had been made.
However, they were unexpectedly escorted back to their hotel, asked to pack, and subsequently taken to a guarded house without explanation.
Background of the detained:
Gambaryan, formerly an IRS special agent involved in the shutdown of digital-currency exchange BTC-e in 2017, joined Binance in 2021.
Anjarwalla, who previously worked at a venture-capital firm and Uber, assumed responsibility for Nigeria at Binance in December 2022.
Legal proceedings:
On February 28, a Nigerian court granted the country’s Economic and Financial Crimes Commission permission to detain the men for two weeks pending an investigation, according to Anjarwalla’s wife.
The investigation’s nature remains undisclosed to the detained individuals and their families.
Conditions in detention:
While confined, the men are occasionally allowed supervised phone usage but remain under guard surveillance.
Family communication:
Yuki Gambaryan communicates with her husband via text messages two to three times daily. Their two children, aged 10 and 4, eagerly await their father’s return.
Similarly, Nadeem Anjarwalla contacts his wife, Elahe, via video calls from Nairobi, ensuring discussions remain non-sensitive to ease each other’s worries.
The men maintain their daily routines, with Anjarwalla even observing Ramadan fasting, and both are hopeful for a swift resolution to reunite with their families in time for significant milestones, such as their son’s first birthday.”