Week In Crypto: Binance Compliance Chief Denies Criminal Charges In Nigeria

April 12, 2024
A Binance executive is detained ahead of a criminal trial in Nigeria, Tether says it will avoid Europe under MiCA, and TerraUSD creator Do Kwon is found liable for securities fraud in the US.

A Binance executive is detained ahead of a criminal trial in Nigeria, Tether says it will avoid Europe under MiCA, and TerraUSD creator Do Kwon is found liable for securities fraud in the US.

An American Binance compliance executive has pleaded not guilty to criminal charges of money laundering in Nigeria, in a key case for the global crypto industry.

Tigran Gambaryan, head of financial crime compliance at Binance, appeared this week at the Federal High Court in Abuja, Nigeria’s capital, after being detained six weeks ago.

Accused of four counts of money laundering and tax evasion, the prosecution says Gambaryan concealed the source of $35m of Binance revenue, knowing that it was derived from unlawful activity.

Following the hearing, Gambaryan was returned to the same medium-security prison in Abuja where almost 900 prisoners escaped in July 2022, following an assault by Islamic State fighters.

He is scheduled to appear in court again for a bail hearing on April 18 and for the first hearing of his criminal trial on May 2.

Gambaryan is an American citizen who flew into Nigeria in February in an effort to negotiate an escalating compliance dispute between Binance and the Nigerian government.

He travelled to the country with Nadeem Anjarwalla, a British national who served as Binance’s regional manager for Kenya, and both were detained shortly after they arrived. 

Anjarwalla is also named as a co-defendant, as is Binance Holdings Ltd, which is additionally charged with operating without a licence and unlawfully negotiating foreign exchange rates.

However, in a dramatic twist to the compliance drama, Anjarwalla is reported to have “escaped” custody after asking his cell guards to allow him time to pray.

In a statement, Nigeria’s Office of the National Security Adviser (ONSA) said that Anjarwalla had used a “smuggled passport” to leave the country, but the executive's family has denied this claim.

The ONSA also said that Nigeria is currently working with Interpol to issue an international arrest warrant for Anjarwalla, in the hope that he can be returned to Nigeria.

An unlawful arrest, says Binance

Both Binance and Gambaryan’s counsel have argued that the compliance executive should not have been detained and bears no responsibility for Binance’s actions in Nigeria.

“Binance respectfully requests that Tigran Gambaryan, who has no decision-making power in the company, is not held responsible while current discussions are ongoing between Binance and Nigerian government officials,” the company said. “Tigran is a strict law enforcement professional and is not part of Binance management.”

Prior to joining Binance in 2021, Gambaryan had served for ten years as a special agent of the US Internal Revenue Service (IRS).

According to Binance, he spent his time at the IRS investigating cases involving national security, terrorist financing, identity theft, distribution of child pornography, tax evasion and Bank Secrecy Act violations.

In partnership with the Treasury’s IRS Criminal Investigations (IRS-CI) unit, Gambaryan led several multi-billion dollar investigations, including the Silk Road corruption investigations, BTC-e bitcoin exchange and the Mt. Gox hack.

“Given this background, Tigran was hired in 2021 to help Binance fix past compliance issues,” the company said.

Since joining the exchange, Gambaryan and the Financial Crime Compliance team responded to more than 600 information requests from Nigerian law enforcement and related agencies.

Gambaryan even provided training sessions for Nigerian crypto crime fighters, including two full days of in-person sessions for Economic and Financial Crimes Commission officials in Abuja and Lagos in 2023.

Rho Rider, a crypto compliance commentator, said the Gambaryan case could be a pivotal case for the crypto industry in jurisdictions where prosecutors seek to penalise unlicensed, offshore platforms.

“Keep in mind, hundreds of former law enforcement and government officials are now taking paychecks from crypto firms,” he said. “But If compliance officials can be held liable, many may think twice.”

Tether threatens to leave Europe under MiCA

The issuer of the world’s largest US dollar stablecoin has said it is likely to exit Europe when the Markets in Crypto Assets (MiCA) regulation comes into effect at the end of June.

Speaking on the sidelines of Paris Blockchain Week, Tether CEO Paolo Ardoino said he is “pessimistic” about Europe under MiCA, describing it as unwelcoming to crypto firms.

“Clearly, the message being sent is that Europe does not want crypto, with regulation that largely limits access to it, especially for retail investors,” he said.

“This is understandable because Europe needs to protect the euro, and it has to be said that stablecoins in dollars are crushing the market, even in Europe. That's why Europe has put in place very restrictive measures on stablecoins.”

Ardoino said that Tether is “particularly bothered” by MiCA’s stringent rules on stablecoin reserves. For example, small stablecoin issuers must hold 30 percent of their reserves in bank deposits, while systemic stablecoin issuers, such as Tether, must hold 60 percent of their reserves in bank deposits.

“These are particularly difficult requirements to meet for stablecoins that have to be very flexible to repay users,” he said.

During the “crypto winter” of 2022, Tether claims to have redeemed almost $7bn of USDT stablecoins in less than 48 hours, and almost $20bn in one month. “This would have been virtually impossible to achieve if we had a quota of deposits tied up in banks,” said Ardoino.

The Tether CEO added that cash deposits expose stablecoins to risk of bankruptcy, as in the case of Circle and Silicon Valley Bank in 2023.

Instead, he said stablecoin issuers should be allowed to keep 100 percent of their reserves in Treasury bills. “In this case, even if the bank goes bankrupt, you are guaranteed to get your assets back.”

TerraUSD stablecoin creator found liable for fraud

The US Securities and Exchange Commission (SEC) has won its case against Terraform Labs and its former CEO Do Kwon following a jury trial in New York.

After a nine-day trial, jurors took just two hours to find the defendants liable for defrauding investors in crypto-asset securities.

Gurbir Grewal, director of enforcement at the SEC, said Terraform and Do Kwon, 32, had deceived investors about the stability of the TerraUSD stablecoin and misled investors about Terraform’s blockchain payments applications.

“Through these deceptions, the defendants caused devastating losses for investors and wiped out tens of billions of market value nearly overnight,” said Grewal.

“For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people.”

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