Nigeria Sues Binance Over Tax Evasion As A Binance Executive Escapes from Custody

The Federal Government of Nigeria has initiated legal proceedings against Binance, a prominent cryptocurrency exchange platform, over alleged tax evasion.

The charges were filed at the Federal High Court in Abuja by the Federal Inland Revenue Service (FIRS), marking a significant escalation in the government’s efforts to ensure compliance with tax regulations within the burgeoning cryptocurrency industry.

The suit, numbered FHC/ABJ/CR/115/2024, implicates Binance with four tax evasion accusations, alleging non-payment of Value-Added Tax (VAT), Company Income Tax (CIT), failure to file tax returns, and complicity in aiding customers to evade taxes through its platform.

Joined with the crypto company as second and third defendants in the suit are Tigran Gambaryan and Nadeem Anjarwalla, both senior executives of Binance, who supposedly are currently under the custody of the Economic and Financial Crimes Commission (EFCC).

According to FIRS, Binance’s failure to comply with tax obligations includes non-registration with FIRS for tax purposes and contravention of existing tax regulations within the country. One of the counts in the lawsuit pertains to Binance’s alleged failure to collect and remit various categories of taxes to the federation as stipulated by Section 40 of the FIRS Establishment Act 2007 as amended, which prescribes penalties and potential imprisonment for defaulting entities.

“Any company that transacts business in excess of N25 million annually is deemed by the Finance Act to be present in Nigeria,” the FIRS Act says.

According to this rule, Binance falls into that category. So, it has to pay taxes like Company Income Tax (CIT) and also collect and pay Value Added Tax (VAT).

Adekanmbi, a legal practitioner said that Binance failed to follow this rule. “So, the company broke Nigerian laws and could be investigated and taken to court for this infraction,” he said.

This move by FIRS, empowered by law to assess, collect, and account for revenue accruing to the Federation and administer relevant tax laws, is believed to be sending a deterrent message to players in the digital asset sector with the tax evasion charges against Binance.

The allegations of tax evasion against Binance have sparked discussions and raised concerns about the Nigerian government’s approach to the crypto giant. Previously, the government had accused Binance of engaging in “illegal transactions” totaling $26 billion and proposed a hefty fine of $10 billion. However, with the focus now shifted to tax evasion charges, some are questioning whether the government has substantive evidence against Binance or if these allegations are merely to get the exchange to pay heavy fines.

Binance largely ceased operations in Nigeria in early March and subsequently, three of its executives were arrested by Nigerian authorities seeking data on users and transactions on the crypto exchange platform.

Meanwhile, in a surprising turn of events, one of the detained Binance executives, Nadeem Anjarwalla, reportedly escaped from custody. Anjarwalla, 38, escaped on Friday, 22 March, from the Abuja guest house where he and his colleague were detained after guards on duty led him to a nearby mosque for prayers in the spirit of the ongoing Ramadan fast.

The Briton, who also has Kenyan citizenship, is believed to have flown out of Abuja using a Middle Eastern airline, raising questions about security protocols and oversight.

Binance’s challenges in Nigeria follow closely after the crypto exchange platform pleaded guilty and consented to pay $4.3 billion to resolve criminal money laundering allegations brought forth by the US Department of Justice. Binance’s founder and CEO, Changpeng Zhao (CZ), pleaded guilty and agreed to step down, while his criminal trial was postponed to April 30 by a US court.

This development adds another layer to the scrutiny faced by Binance on an international scale.