In a landmark legal initiative, Nigeria’s Federal Inland Revenue Service (FIRS) has launched an aggressive lawsuit against Binance Holdings Limited, holding the cryptocurrency exchange accountable for a staggering $81 billion in unpaid taxes and penalties. This unprecedented move reflects not only the financial stakes but also highlights the increasing scrutiny on international cryptocurrency firms operating within national jurisdictions. The charges, reported by Nairametrics on November 19, are striking in their scale, with the FIRS aiming to recover $79.5 billion in purported economic damages along with additional fees linked to Binance’s operations in Nigeria.
The specificity of the claims is indicative of a calculated approach from the Nigerian authorities. Among the demands, almost $2 billion in outstanding income tax for the years 2022 and 2023 is at the forefront, marking a significant escalation in the financial tensions between Binance and Nigeria. This figure dwarfs the already hefty $4.3 billion penalty that Binance had previously settled with U.S. regulators, evoking questions about the global disparity in regulatory environments for cryptocurrency platforms. If the Nigerian government’s penalty is enforced, it would set a worldwide precedent as the largest financial fine against a crypto entity by any nation.
The allegations hinge on Binance’s purported failure to register its business activities in Nigeria, despite reaping substantial profits from a vast local user base. This, according to FIRS, constitutes a violation of the Companies Income Tax (CIT) Act and the Significant Economic Presence (SEP) Order. The SEP legislation imposes obligations on foreign entities that generate significant income from local markets, specifically those earning at least N25 million ($30,000) annually from Nigerian clients. Allegations detail that Binance’s operations have seen staggering trade volumes—amounting to $21.6 billion, with net revenues reported at $35.4 million in 2023.
This lawsuit is accompanied by a 10% penalty for alleged tax evasion and a significant interest charge calculated at 26.75% from January 1, 2023, to January 1, 2024. Such figures illustrate the Nigerian government’s commitment to enforcing its tax laws and the serious repercussions that foreign firms may face if they fail to comply with local regulations. Furthermore, FIRS claims that Binance has been operating financial services that are unauthorized and that it has not adhered to anti-money laundering regulations, exacerbating the economic impact on Nigeria.
The legal pursuit against Binance is positioned within a broader context of regulatory pressure from global governments on cryptocurrency firms. It follows the withdrawal of previous legal charges against Binance executive Tigran Gambaryan, who has publicly contended that Nigerian authorities have targeted Binance in a bid to deflect from domestic economic issues. Rugged claims of corruption within the Nigerian government mark Gambaryan’s defense, though officials have rebuffed these assertions, labeling them as unfounded.
This unfolding saga underscores the urgent need for clarity in regulatory frameworks governing emerging technologies like cryptocurrencies, not just in Nigeria but worldwide. As countries navigate these uncharted waters, the case against Binance could serve as a defining moment in the interplay between regulatory bodies and cryptocurrency market participants.