• Business - Your Money
  • Updated: August 18, 2021

CBN's Fintech Accounts Freeze: What It Means For Your Investments

On Tuesday August 17, 2021, a Federal High Court in Abuja granted the request of the Central Bank of Nigeria (CBN) to freeze accounts of six FinTech companies over its investigation of “illegal foreign exchange trading” by the companies.

The apex bank wants to keep these companies' accounts frozen for 180 days pending the conclusion of its investigations. The companies affected are Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Bamboo Systems Technology Limited OPNS, Chaka Technologies Limited, CTL/Business Expenses, and Trove Technologies Limited. All six of them are being accused of operating without a license.

Many Nigerians use these platforms to invest in foreign stocks or cryptocurrencies, and as a result, are worried that the freeze might affect their deposits and investments. However, soon after the judgement was made public, the FinTechs issued press releases assuring their users about the safety of their investments.

Bamboo told investors, “We’re aware of the recent reports about us. Our legal and government relations teams are looking into it but we thought it was important to let you know that your money remains safe with Bamboo and will always be readily accessible.”

Risevest also responded saying, “With regard to the latest news about us and our FX dealings, you can be sure that your investments and funds are safely managed, that funding and withdrawals will continue to be processed as normal and that our U.S operations remain intact. We will work with regulators, as we always have to ensure that all issues raised are properly addressed. However, this does not affect our users or their investments, which are managed by regulated third-parties in all jurisdictions in which we operate.”

Are Your Investments Still Safe?

Firstly, it is highly unlikely that the CBN will allow depositors to lose their money just to punish FinTech companies that they believe are flouting their rule. The most likely endgame of the apex bank would be to impose a fine on these companies and order them to desist from accepting deposits to convert to dollars.

In a worse scenario, the companies will be asked to refund all investor accounts which are yet to be transferred to the broker accounts.

In addition to the assurances given by the companies, they also stated clearly in their applications that investor funds are insured against loss of cash and securities (such as stocks and bonds) held by a customer of a financially troubled Securities Investor Protection Corporation (SIPC) member. The SIPC protects investments to the tune of $500,000.

These FinTechs operate under the license of a brokerage account in the US where they transfer all the funds which are used to acquire shares on behalf of Nigerians. Those accounts are out of the reach of Nigerian authorities and cannot be frozen. FinTechs will however have to be able to separate their own funds from that of depositors for transfers to function. This is the case for some of their applications. For example, when transferring funds through Trove, you are given a Providus Bank account in the name of Trove/Account Owner. This is where you deposit the money which is then used to purchase stocks on your behalf.

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Oluwatosin Ogunjuyigbe
Oluwatosin Ogunjuyigbe

A seasoned business content writer, financial markets analyst, and tech enthusiast.

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