Nigerian cryptocurrency investors using peer-to-peer (P2P) services have expressed concern over the flagging of their bank accounts by the Central Bank of Nigeria. The CBN's decision to flag the accounts is believed to be related to the nearly $6.3 million (N2.9 billion) Flutterwave hack, as the bank account's link to the hack has yet to be proven.
Local sources reported that on February 19, Nigerian fintech firm Flutterwave’s legal counsel, Albert Onimole, reported to the police in Yaba, Lagos that nearly $6.5 million (3 billion naira) had been illegally transferred from the accounts of its clients. On February 27, an ex parte motion was filed and granted in support of Flutterwave's claim. Under the motion, 107 accounts, including the fifth beneficiary, will be placed in lien/post non-debit (PND) status. So far, several locals have confirmed that their accounts have been frozen due to the hack.
This situation continues to prevent P2P users from interacting with various over-the-counter (OTC) markets, which allow securities transactions between two counterparties to be executed outside of an official exchange and without the oversight of exchange regulators. That’s because the stolen funds flowed into Nigeria’s cryptocurrency market through different OTCs, and now users face problems with financial intermediaries when they want to use P2P services for cryptocurrency transfers.
Investors around the world use P2P as a medium for the direct exchange of cryptocurrencies between parties without the involvement of a central authority. They may choose to exchange crypto for crypto or crypto for cash. In 2021, the CBN announced a regulation prohibiting financial institutions such as banks from enabling cryptocurrencies. However, Nigerians were able to find a way forward and still maintain their lead as the largest cryptocurrency hub in Africa through the use of P2P platforms. Some community members believe that this may affect the general interest of Nigerians who have not yet joined the encrypted digital ecosystem to acquire digital assets.
One concerned Nigerian said the situation had caused some businesses to close. This is as unsuspecting entrepreneurs receive payments for their services and the funds are allegedly tied to the stolen amounts, leading to confusion and possible legal ramifications. P2P marketplaces have facilitated trade in Nigeria despite the strict encryption regulations imposed by the CBN. However, a financial analyst named Sadeik called it a dark center for scammers to launder their money. He went on to say that a friend of his lost more than 500,000 naira because someone he traded with flagged his account in the Flutterwave hack.
In an official statement, Flutterwave denied the hack, saying it had detected unusual trading trends on some user profiles and immediately initiated a review under its standard operating procedure. The review allegedly revealed that some users who did not activate the recommended security settings could be vulnerable to hacking. The statement added that Flutterwave was able to resolve the issue before any harm was done to users.
