Nigeria’s Securities and Exchange Commission (SEC) last week, issued a directive ordering Binance Nigeria Limited to cease soliciting Nigerian investors.
According to them the entity was not registered or regulated by the Commission, thus rendering its operations illegal in Nigeria.
This led to confusion as news reports initially mistook BNL for a subsidiary of Binance, the world’s largest cryptocurrency exchange.
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Binance Facing Multiple Challenges
Facing regulatory challenges in multiple countries, including the United States, the Netherlands, Canada, and Australia, Binance seemed to be under scrutiny by Nigeria’s financial regulator as well.
However, Binance’s founder, Changpeng Zhao, clarified on Sunday that Binance Nigeria Limited was a “scam entity”. The founder added that Binance had issued a cease and desist notice to the company.
Public documents reveal that Binance Nigeria Limited was registered by a lawyer named Ahassan Afzal Mughal.
Despite Zhao’s claims, Mughal denied any sinister intentions and confirmed that the company had no affiliation with the crypto giant. He explained that he registered the company with the hope of selling the name to Binance.
Mughal stated that if the crypto giant chose to legally enter the Nigerian market, he would willingly transfer full control of Binance Nigeria Limited to them. Not only that he would offer his legal services to help ensure regulatory compliance.
Nigeria’s Registry Reveals Otherwise
A search on Nigeria’s company registry shows that Binance Nigeria Limited was registered in December 2019 and is currently listed as “inactive”.
This contradicted the SEC’s assertion that the company had been actively soliciting Nigerian citizens for crypto asset trading on its platforms.
Legally, Mughal’s actions of registering the company are not inherently illegal. Since there are no operational websites or apps associated with Binance Nigeria Limited, Mughal maintains that his intention was solely to sell the company name to Binance.
It would only be considered illegal if he had intended to establish a connection to the crypto giant through marketing or operating in the same field. This would be seen as fraudulent misrepresentation.
However, this incident raises concerns about the ease of company registration in Nigeria and the need for more stringent regulations.
Zikora Okwor-Wewan, a partner at Springwoods LP, emphasized the importance of making regulatory agencies more cautious during the registration process.
This is given the fact that Mughal did not need to provide evidence of a connection to the crypto giant.
Conclusion
This situation highlights the challenges faced by the crypto giant in various jurisdictions. It underscores the need for clearer regulatory frameworks in the cryptocurrency industry to protect investors and prevent potential scams or fraudulent activities.
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