In a significant escalation of its regulatory actions against cryptocurrency platforms, the Nigerian government has filed a lawsuit against Binance, the world's largest cryptocurrency exchange, seeking a total of $81.5 billion in damages and taxes. The lawsuit, filed by Nigeria's Federal Inland Revenue Service (FIRS) in the Federal High Court in Abuja, alleges that Binance's operations have led to substantial economic losses and tax evasion within the country.
Allegations and Financial Claims
The lawsuit demands $79.5 billion in compensation for economic damages and an additional $2 billion for unpaid taxes covering the years 2022 and 2023. FIRS asserts that Binance failed to register with Nigerian tax authorities, thereby neglecting its tax obligations. The agency is also seeking a 10% penalty on the unpaid taxes and an annual interest rate of 26.75%, corresponding to the Central Bank of Nigeria's lending rate, on the outstanding amounts from January 2023 to January 2024. These claims are detailed in court documents reviewed by Reuters.
Economic Impact and Regulatory Violations
Nigerian authorities contend that Binance's activities have significantly contributed to the depreciation of the national currency, the naira. The Central Bank of Nigeria conducted an assessment in May 2024, estimating that Binance's operations resulted in approximately $79.5 billion in economic damages over a six-month period.
The lawsuit further alleges that Binance operated covertly within Nigeria despite having a substantial economic presence, violating several national regulations, including the Companies Income Tax Act, the Federal Inland Revenue Service (Establishment) Act 2007, the Central Bank's Regulatory Framework for Mobile Money Services, and the Companies Income Tax Significant Economic Presence Order.
Detention of Binance Executives
This legal action follows a series of regulatory measures against Binance in Nigeria. In February 2024, Nigerian authorities detained two Binance executives, Tigran Gambaryan and Nadeem Anjarwalla, on allegations of illegal operations and foreign exchange manipulation. Anjarwalla subsequently escaped custody in March 2024, leading to further legal complications. Gambaryan remained detained until October 2024, enduring severe health issues during his imprisonment. The detentions were part of a broader crackdown on the cryptocurrency industry, with officials accusing Binance of contributing to Nigeria's economic instability.
Binance's Response and Ongoing Legal Challenges
Binance has previously stated its intention to cooperate with Nigerian authorities to resolve any tax liabilities. However, the company has not yet issued an official comment regarding the current lawsuit. In March 2024, amid mounting regulatory pressure, Binance ceased all naira trading activities on its platform. The company is currently contesting four counts of tax evasion and is also facing separate money laundering charges from Nigeria's anti-corruption agency, which it has denied.
Implications for the Cryptocurrency Industry in Nigeria
The outcome of this lawsuit could have significant implications for the operation of cryptocurrency platforms within Nigeria. A ruling against Binance may set a precedent for how digital asset exchanges are regulated and taxed in the country, potentially influencing future regulatory approaches to the burgeoning cryptocurrency market. As the case progresses, it is expected to impact not only Binance's operations but also the broader landscape of digital finance in Nigeria.
This legal battle underscores the ongoing tension between innovative financial technologies and traditional regulatory frameworks, highlighting the challenges governments face in adapting to the rapidly evolving digital economy.
