Social media has been buzzing following the recent move by the Central Bank of Nigeria to freeze the accounts of four fintech companies- RiseVest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited, and Trove Technologies Limited.

These fintech companies have been reputably known to be conduits for investing money in foreign stocks, bonds, and other assets on behalf of their depositors. They mostly operate under the license of a brokerage account in the US where they transfer all the funds which are used to purchase shares on behalf of their local depositors.

With a lot of Nigerians investing massively via these platforms, the fear of having to lose all they laboured for, has driven some of them to ask pertinent questions from such as; Why the recent move from the CBN? What does the recent move by CBN entail? Why were the accounts of these platforms temporarily halted?  And what will be the fate of their investments?

In response to some of these emails and questions, decided to educate our teeming followers and the general public as regards the recent development.

What the recent move by the CBN entails

The CBN sought and obtained a federal high court order to freeze the accounts of the affected fintech companies for a period of 180 days. Confirming this, a counsel to the Central Bank of Nigeria (CBN), Chief Michael Kaase Aondoakaa, SAN, claimed that these investment companies were undermining CBN’s effort in strengthening their Naira, as a result of the illicit FX transactions carried out through their platforms.

By the virtue of the recent order given by the Federal High Court in Abuja, the affected FinTechs will be unable to accept new deposits. In addition, the order will also affect depositors who are yet to invest or transfer to their brokerage accounts. understands that depositors, who have transferred their funds to brokerage accounts prior to the order, will be relatively not affected, as most of the concerned FinTechs operate under the license of a brokerage account in the US where they transfer all the funds. This puts those accounts outside the reach of the Nigerian authorities and therefore cannot be frozen.

In line with this, it is advisable for investors not to panic at this stage. In fact, based on the prognosis of the current event, investors who will decide to liquidate their investment now will risk the danger of getting their funds frozen or trapped.

READ: How CBN Forex Ban on BDC’s will affect small businesses in Nigeria

Why did the CBN take such harsh action?
 In July 2015, the CBN issued a circular titled ‘’RE-Inclusion of some imported goods and services on the list of items not valid for foreign exchange in the Nigerian foreign market,’’ where it warned FinTechs of using forex obtained from the Nigerian FX market to buy foreign bonds/shares. Re-echoing these thoughts, the apex bank said: ‘’For the avoidance of doubt, any Authorized Dealer that is found to have used funds from interbank, export proceeds and bureau de change to consummate these items classified as Not Valid for Forex or undertakes money wire transfer for a BDC shall be sanctioned appropriately.’’

In light of the above, the CBN accused the affected FinTechs of grossly abusing the provisions contained in the circular. The apex bank in clear terms accused the firms of using forex obtained from the Nigerian FX market to buy foreign bonds/shares, in violation of the earlier provisions. It also accused the firms of operating as asset management businesses without a license.

Rationalizing the move to suspend the accounts of the affected FinTech companies, the apex bank noted that: ‘’Rise Vest Technologies Limited was Incorporated in October 2018 with objects of technological and business consultancy. The company’s shareholders at incorporation were Eke Eleanya Urum and Rise Vast Technologies Limited (USA). The company partners with companies involved in payments and settlements as well as internal and international remittances.

“However, information on the company’s website indicated that it is an asset management company, which provides a platform for customers to invest in foreign instruments using an app called “Risevest.

“Our review revealed that the company consummated its asset management activities through its account 1017556580 with Zenith Bank Plc, which recorded a turnover of 1.97 billion between January 1, 2019, and April 27, 2021.

“Inflows to the account were mainly from retail investors through two Payment Service Solution Providers(PSP): Flutterwave (588.61 million) and Monnify (N967.58 million).

“Outflows from the account were to a PSSP – Paystack (N500.00 million) and cryptocurrency traders Iike BuyCoins (N110.00 million) and Bellum Venture (N350.00 million). Inquiries on the transactions confirmed that the transfers to BuyCoins were for the purchase of cryptocurrency.

“The above is indicative that Rise Vest Technologies Limited traded in cryptocurrencies in contravention of the CBN circular referenced BSD/DIR/PUB/LAB/014/001, dated February 5, 2021.

‘’On the other hand, Bamboo Systems Technology Limited is owned by US-based Bamboo Global LLC (99.99%) and Oluwole Raiph Olugbenga (0.01%).

“The company was incorporated in December 2018 to carry on the business of software design, implementation, development, maintenance, and consultancy, amongst others. It is related to One Global Med. Technology, BSTL Lambeth and Greg Concepts Limited.

“Further reviews showed that Bamboo Systems Technology Limited operates an online App, “Bamboo,” that provides a medium for investors to buy and sell stocks, exchange-traded funds (ETFs), Index funds, and derivatives listed in major exchanges in the U.S.”