Binance crackdown based on analysis of P2P trading in February

The Central Bank of Nigeria’s suspicion of manipulation of forex prices on Binance was confirmed by internal analyses of peer-to-peer trading on the exchange, TechCabal has learned.

An analysis of trades between February 19 to February 21 identified a cluster of Nigerian retail traders making large buy orders for USDT they didn’t eventually buy. Authorities believe these traders manipulated prices to benefit from the resulting arbitrage opportunity.

The analyses conducted by research teams are still ongoing, according to a person close to the matter. An internal report of the aforementioned three-day analysis linked what it said was an artificial demand for USDT with the naira’s quick drop from $1/₦1,500 to $1/₦1,950.

The Central Bank did not respond to TechCabal’s request for comments.

Hamma Bello, an operative of the Economic and Financial Crimes Commission, told a court on Monday that a special investigative team surveilled the Binance platform.

“The team uncovered users who have been using the platform for price discovery, confirmation, and market manipulation, which has caused tremendous distortions in the market, resulting in the Naira losing its value against other currencies,” Bello said in an affidavit.

It’s similar to a claim in the internal presentation seen by TechCabal. “The marketplace shows only people willing to buy USDT and an almost non-existent selling side. A $132 million worth of ads for buying USDT with less than $800,000 to match on the other side for 2/22/2024 is an example of this.”

Binance did not immediately respond to TechCabal’s request for comments.

The report claimed that more than 40% of the buy offers came from the same accounts. While some traders repeatedly were looking to buy as much as $1.9 million, others posted much smaller trades as low as $500 on a rolling basis.

On March 12, the Financial Times reported that the federal government asked Binance for information on its top 100 users in the country and all transaction history for the past six months. This may be a bid to identify the traders listed in the internal report seen by TechCabal. Today, a court in Nigeria ruled that Binance must hand over the data.

On Thursday, Binance released a statement signaling it would cooperate with the government. It claimed that since 2020, it has responded to over 626 information requests that have assisted the government’s investigations into financial crimes such as scams, fraud, and money laundering.

Since Nigeria floated the naira in 2023, price discovery for the US dollar has increasingly happened through P2P trading on crypto exchanges like Binance and Bureau de Change operators. The apex bank shared amendments to its policy on BDC operators and revoked licences for over 4,000 operators as FX volatility worsened in February.

Regulators believed that Binance, one of the most popular crypto exchanges in the country, played an outsized role in price discovery and attendant volatility. Olayemi Cardoso, the CBN governor, said “expediting genuine price discovery” would solve the problem. It prompted an investigation into Binance.

The Binance website is no longer available to Nigerians, and the platform has also delisted its NGN/USDT trade option. Aside from Binance, other crypto platforms like Onboard Wallet also disabled the USDT/NGN pair on their platforms.

The two Binance executives, Nadeem Anjarwalla, a UK citizen, and Tigran Gambaryan, a former US Internal Revenue Service special agent, who came to Nigeria when the government threatened to block access to the company’s website are still in the custody of the authorities. According to the Financial Times, the court order that permitted a 2-week detainment of both executives expired on Tuesday, but they have not been released.