Nigeria’s SEC Imposes Stricter Penalties for Crypto Scams with Prison Time and Hefty Fines

Nigeria Tightens Laws to Combat Cryptocurrency Scams

Nigeria's financial watchdog, the Securities and Exchange Commission (SEC), is stepping up its fight against cryptocurrency-related fraud with proposed amendments to the Investment and Securities Act.

These changes aim to introduce severe penalties for offenders, including fines of up to 20 million Naira (approximately $12,000) or prison sentences of up to 10 years.

The decision follows growing concerns over fraudulent schemes exploiting the popularity of digital currencies.

A Nation Battling a Legacy of Fraud

Being one of the world’s largest cryptocurrency markets, Nigeria has long been grappling with scams that erode trust and hinder growth.

One of the most infamous cases, the MMM Nigeria Ponzi scheme, collapsed in 2016, devastating millions of unsuspecting Nigerians.

Such schemes often present themselves as legitimate investment opportunities, only to leave victims with substantial losses.

The impact of these fraudulent activities goes beyond individual losses; they tarnish Nigeria’s reputation on the global financial stage.

As scammers leverage the term "cryptocurrency" to deceive investors, regulatory bodies face mounting pressure to safeguard both citizens and the nation’s financial image.

A Rapidly Growing Crypto Market Met with Regulatory Challenges

Despite its challenges, Nigeria remains a prominent player in the global cryptocurrency landscape.

Chainalysis, a leading crypto intelligence firm, ranked Nigeria second worldwide for cryptocurrency adoption in September 2023.

Additionally, the country has consistently shown high interest in digital currencies, ranking as the most crypto-curious nation globally based on Google searches for terms like “buy crypto.”

Yet, this enthusiasm has been met with scepticism from Nigerian regulators.

Over the past two years, authorities have taken a hard stance on cryptocurrency activities.

In 2022, the Central Bank of Nigeria prohibited financial institutions from providing services to crypto exchanges.

The SEC also declared Binance Nigeria Limited illegal in September 2023, stating the platform lacked proper registration and regulation.

By February 2024, presidential advisers went further, calling for a ban on Binance, KuCoin, and other major platforms.

In April, Nigeria's anti-corruption agency, the EFCC, froze over 1,100 crypto traders' bank accounts, accusing them of currency manipulation, money laundering, and terrorism financing.

Banks require court orders to release funds, but the EFCC's 90-day freeze leaves traders in limbo.

Binance Legal Disputes Spark Controversy

Binance’s operations in Nigeria have added another layer of complexity to the nation’s crypto saga.

Tensions escalated in February 2024 when Binance executive Tigran Gambaryan was detained during a visit to the country.

His colleague, Nadeem Anjarwalla, managed to escape detention, but Gambaryan was held at Kuje Correctional Centre under allegations of tax evasion and money laundering.

Although a Nigerian court cleared Gambaryan and Anjarwalla of tax-related charges on 14 June 2024, the case left a mark.

L-R: Tigran Gambaryan and Nadeem Anjarwalla

According to Lucky Uwakwe, President of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), these incidents have created “an atmosphere of uncertainty and risk” for potential investors in Nigeria’s blockchain sector.

Adding to the tension, US lawmakers French Hill and Chrissy Houlahan visited Kuje Prison to advocate for Gambaryan’s release.

Hill described the conditions as “horrible” and raised concerns about Gambaryan’s health while in custody.

Gambaryan was finally released last month after 7 months of nightmare in the prison.

Though all charges against him have since been dropped, his detention highlights the precarious environment for cryptocurrency firms operating in Nigeria.

Balancing Regulation and Growth

While the Nigerian government strives to regulate the fast-growing crypto market, its stringent measures could have unintended consequences.

Critics argue that a harsh regulatory approach may stifle innovation and discourage international partnerships.

Yet, the government’s actions suggest a commitment to protecting citizens from exploitation and addressing the vulnerabilities in the financial system.