Ep 128: Unraveling the Binance Saga in Nigeria with Stefen Deleveaux

[00:01] Welcome to the Feelings Check-In, a feelings first look at the news of the week. Takes no one asked for on topics everyone's talking about. I'm Natasha Hoskins. I'm Dina Burke. And this is Boys Club. Wait, is it just Boys Club? It's just Boys Club. The Boys Club podcast? No. [00:19] Just boys club. [00:20] Hi. GM. We're in Seoul. Here we are. The challenge is to do a whole podcast. [00:26] in Seoul and never once mention how jet lagged we are. That's what we have to try and do here. No, we're in Seoul for Fiddle Asia, [00:36] Seoul is... [00:38] A fascinating city. Built different. It's built different. It's built real different. I'm in the 93rd floor in my room, which in... [00:51] When you're living on the 93rd floor, I'm like, oh, I'm in space. I'm on a spaceship. [00:58] It's crazy. It's really wild. We put a woman on the moon. [01:04] So it's, yeah, it's a crazy town. More to come there. But we're doing a small preface to... [01:11] this pod that we did with Stefan Delaveau, [01:14] talking about the Nigeria... [01:17] finance story because there's been some breaking news that happened so dina and stefan did a great job breaking down this story in general there's just there's a story there's a thing that's happening with some finance employees in nigeria and i was on vacation so thank you to the team for stepping in so the first part of the pod and then at the very end of the pod there's been some developments on that story so dina and i are just gonna give some breaking news towards the end of

[01:47] and [01:48] And that's what you can expect from this podcast. [02:18] to help you along the way. If you're ready to check out the simple, secure way to trade crypto, go to kraken.com/boysclub and see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to US and US territory customers by Payward Ventures, Incorporated, PBI, DBA, Kraken. View PVI's disclosure at kraken.com/legal/disclosures. We have a special podcast today. [02:47] It's just me and my lovely guest, no Natasha. Today she's off in Japan doing fun things. But with me, I have Stefan Delaveaux. [02:55] As Natasha's replacement. Hi, Stefan. Hey, hey. So Stefan is the creator of Oasis on Chain, a incredible consumer crypto summit in Nassau, Bahamas. Also the president of the Caribbean Blockchain Alliance. And I'd say generally a voice for crypto in the global south. So welcome to the show. [03:16] Always good to be here. Always good to hang out. Friend of the pod. You've been on before. I have. So second timer. The number of second timers that we've had on the pod is really small. So you're in an elite.

[03:28] group, but well-deserved. [03:30] Appreciate that. I love this for me. Okay, Stefan. So I have you on today because there's been a story circulating that has not been picked up much by the crypto press, although I have seen it in mainstream media. And we can maybe talk about that in a bit. But it feels very much like headline news. I don't know why crypto isn't talking about it. [04:00] Yeah. [04:00] tigran gambar yen who's a u.s citizen and also binance's head of financial crime compliance [04:06] And Nadim Andrawala, who is a British Kenyan who lives in Kenya, who is Binance's regional manager for Africa. The two of them flew to Nigeria for a scheduled meeting with the Nigerian government on February 26. And they were detained on their arrival on February 26. They've been there since February 26. So we're three, four weeks in. Up until this week, the two men were detained without being charged. And it was really unclear what was happening. It still is unclear what was happening. [04:36] a court date, but still a lot of uncertainty. They announced that there won't be a decision on what happens next until April 5th. [04:42] A little bit more background here and then I want to get into some context. These are employees. They're Binance employees. They're senior employees, but they're not decision makers, I'd say. One other piece that I'll put into that on March 8th, the government demanded that all trading on Binance that used the Naira, which is Nigeria's currency, was to be halted.

[05:00] So that is an important layer to the story. Is there anything that you think I'm missing for the news of it all? [05:06] Yeah, I mean, kind of insane to watch in real time. Just to preface this, obviously, we only know what's being shown in real time. We're not on the ground in Nigeria. But yeah, I think this kind of backlash against Binance by the Nigerian government has been going on for a little while, but mainly in terms of worrying about inflation, worrying about the devaluation. [05:26] worrying about how many people are using Binance and trade and crypto. Nigeria is [05:30] very important to crypto in general. Like Nigeria has a huge user base of crypto users, people who trade, also just people who use USDC or USDT for payments, for example. [05:41] So when you have a lot of people using crypto, government's going to take notice. There's a report, the 2023 crypto adoption report by Chainalysis, [05:49] Nigeria ranked first globally for peer-to-peer trade exchange volume and second overall for crypto adoption. So a lot of Nigerians are using crypto. So that's on one side. On the other side is some important context on the Naira, which is Nigeria's currency. First of all, inflation is really high in that country. Right now, it's a 27-year high on food costs. [06:13] The Naira's value has depreciated, so it's down 40% since November. It's a lot. [06:20] It's a lot. It's a lot. And also just generally, there's a lot of foreign exchange shortages. So folks are turning to crypto and stable coins to protect the value of their money. And my understanding was that Binance was acting as kind of an unofficial market for the Naira. And basically the prices...

[06:39] on Binance for trading in and out of the Naira were lower than what you'd get at a bank. [06:45] So I guess CLDR, a lot of people are using crypto in Nigeria. The Naira, the Nigerian currency weakened considerably over the past year. [06:54] And finance was kind of acting as an exchange and was giving favorable rates than the banks on the Naira. So it was perhaps contributing to the decline of the currency. Does that feel accurate? [07:07] Yeah, definitely. And it looks at this kind of banks first crypto thing, because obviously banks usually tend to set at least for floating currencies or free market currencies. Banks tend to set those rates. And now that another entity directly or indirectly is especially a crypto one is setting rates. Governments aren't happy with it. So there is this kind of like trad five versus DeFi kind of thing going on. Not quite DeFi, but close enough, especially because it is like it's not Binance saying this is the rate for the Naira. [07:36] It's people trading and saying, this is the rate I want. And now that you have all these people doing that, the people are kind of saying what they want and it's a problem. Yeah, I think that's actually a really important note that Binance was not setting the rate for the Naira and that it was peer-to-peer trades that were happening. And so other people were setting the rate for the Naira. But this retaliation, I don't know, speculation around retaliation may or may not be, but the Nigerian's government move here is against Binance, the platform.

[08:06] So when they... [08:08] put a pause or a halt towards crypto trading with the naira they did the same for other crypto exchanges as well like kraken for example but binance being the biggest one is obviously [08:18] where most of the impact is felt. [08:20] Okay, so these two guys are in Nigeria. They're being detained. What happens now? Like, what's the Nigerian government saying? What's Binance saying? What's your sense on that? Yeah, honestly, we don't know. I think everyone's just kind of waiting to see now that they've said... [08:38] that April 5th is when everything happens, which feels kind of far away. So that's even more time that these guys just have to sit and wait. There's also the question of the central bank claim that there's money laundering, illicit funds, quote unquote. And the question is, is this just a currency play? Or is this something else that we just don't have information on, which is possible? But I would say, first glance, it does seem like they're just trying to get a hold on their own devaluation issues and doing kind of whatever means necessary [09:07] to do it. It just seems like a very, very aggressive move. So really curious to see what happens next. [09:14] Do you think that... [09:15] it works shutting down binance do you think that that would cause the currency to stabilize or is the genie kind of out of the bottle at that point [09:25] G&E is definitely out of the bottle. I mean, obviously, it'll curb some of the trading. But also remember, a lot of this was peer to peer by default. People have always found a way to trade crypto, especially if they don't need necessarily an onboarding tool. Like if they already have access to crypto in some way, they're going to find ways to trade.

[09:55] especially for folks that live in countries where they're super [09:58] high inflation and or the currency is is not as strong. Whether you like finance or not, it's a really critical part of the [10:08] ecosystem and for many people, especially if they can't access traditional finance. But yeah, they have a terrible reputation. How much do you think the reputation has played into these actions? [10:18] MARK MANDEL: Yeah, that's a really good question. I think it probably accelerated things, because globally, Binance doesn't have a great reputation. There's also the question of, is that-- [10:26] unnecessary evil. Like if you look at Uber, they just went out and did a lot of things without asking permission and then had to like do different deals and whatnot later, but it helped them get global from the beginning. Binance can honestly do what like a Coinbase can't do, for example, which is why Coinbase isn't global right now. Binance is kind of everywhere because they just kind of don't care in a lot of ways. Yeah, they do their own thing. Totally. But I think obviously it puts them in a certain light and it also just means that whatever they [10:56] Like, now, does it necessitate this level? I would say probably not. But I think also, if all of a sudden they turn around and Nigerian government says, oh, we can point towards... [11:08] this particular transaction that is money laundering and something like that, then we'll have a real case on our hands. But if they can't do that, then what they're doing is kind of ridiculous. Okay, you turn me on to Zero X Kofi, who is a Twitter user, and I'll link in the show notes. One thing they said was, this is a worrying signal regarding crypto's future in emerging markets. Developing countries like Nigeria are the places crypto has the highest utility, but they're also where it poses the greatest threat to central authorities, and therefore where it

[11:38] face the most aggressive pushback from governments. What's your take on this? Yeah, I completely agree. My first thought when looking through this was like, [11:46] We're going to see this happen again. We're probably going to see this happen in other countries. This is something that you may not think about because of the U.S.'s dominance in terms of their dollar. But pretty much the majority of, let's just say, just the global south, like emerging markets, they all have their own currency. They are either pegged probably to the dollar in some way or fully free floating, meaning that, you know, just like crypto, whatever the supply and demand is, is what the price is. [12:11] Which is what happened with the Naira recently. Exactly. Yeah, so last year they... [12:16] They moved it. They were... [12:18] It's pegged to the dollar. I'm not sure to what ratio, but then they made it fully free-floating, which is why they're having so many issues now. And the central banks, for whatever country, are going to be like, [12:30] "Okay, well, we had a handle on our currency. Now everyone's using crypto." [12:34] Now we don't have a handle on it. What's going to happen? And I mean, I, [12:38] Unfortunately, I do get it from their perspective. Their job is to keep the currency as stable as possible, and crypto is a threat to that. [12:46] So I... [12:47] Could absolutely... [12:49] imagine more moves like this or at least similar moves where they're either [12:54] blocking exchanges from interacting on the ground, or they maybe add like a hefty tax [13:00] onto crypto transactions, at least through centralized exchanges. Obviously, that would be a nightmare to actually establish. So I don't know how specifically that's going to happen, but I could definitely imagine doing a number of moves where it's just like, we don't want this to happen. Let's try to curtail it as much as possible. And I think in a lot of regimes throughout this, this is true in the Caribbean. There is strong exchange control, meaning that when you interact with

[13:26] or transact with any currency that's not the national currency. Either it's anywhere from [13:32] it's not allowed to, oh, there's an extra tax on top of it, or you have to like register in some way. [13:38] So... [13:40] I can see government saying, OK, if it's crypto, even if it's like USDC, we consider that another currency. [13:46] are we going to put either block on it or something that you have to do on top of it or like extra tax that you have to do? [13:51] That's what you do in the Caribbean? [13:53] So exchange control exists pretty much across the board. For example, in Trinidad, it is very hard to get U.S. dollars. [13:59] like in any capacity. [14:00] In the Bahamas, it's very easy because U.S. dollars are always here. But especially if you're interacting with like the euro or like the Swiss franc or something like that, you have to register. Right. And there's like a small tax on top of that. [14:14] It kind of ranges across the board, but yeah, we have to deal with that too. And that's to prevent situations like what's happening with the Naira. So for example, when COVID happened, we were in full lockdown. No tourists were coming in and that's where most of our US dollars were coming from. And because of foreign exchange and like you have to have reserves just to keep your currency afloat. [14:33] So the biggest fear was around that time. And I think, again, that was like across the board where if you don't have foreign currency coming in, there's nothing to prop up or keep your own currency stable. So if we ever see... [14:48] something like that again. Like, let's just say, God forbid, there's another pandemic. That's when I would expect to see globally heavy pushback against like crypto exchanges. But yeah,

[14:58] Right now it'll be like more on an individual country basis for sure. [15:02] I wonder if it's [15:04] curbed [15:05] cryptocurrency [15:06] usage by just everyday people in Nigeria. And if anyone's listening, that's there, let us know. Or if like you say, the [15:14] the genie's out of the bottle and people are using what they have in their wallets. Yeah, it's a great question. There has to be at least two to three other ways that people are interacting right now that is completely under the radar. [15:26] Yeah. [15:27] Totally. Do we feel like decentralized exchanges circumvent [15:32] this issue for people who want to interact with cryptocurrency, but now trading on Binance with an IRAs is banned. [15:41] in Nigeria, like, could they go on a, on a DEX and use that as a workaround? [15:46] So yes and no. The beauty of DEXs is that you can access them pretty much however you want. But of course, right now, most people still have to on-ramp or off-ramp actually with a centralized exchange. Okay, and explain that process just for folks who might be new. [16:03] So for example, let's say it's Binance. I only have fiat. I only have a dollar. I would, you know, whether it's through maybe like a check or like a credit card or some kind of interaction. [16:13] mostly through a bank or some kind of local fintech maybe, I would sell my fiat and buy crypto. And now I have crypto. Now I can take it. [16:22] off of Binance, switch out onto my wallet and then use a DEX. Then I can jump on Uniswap, then I can jump on CalSwap or whatever. And then of course,

[16:30] that's still not even getting to the off-ramp but let's assume you know we have there's enough merchants on the ground that will take usdc or usdt and then i can offer them that way but [16:39] still getting crypto in the first place unless again it's like a peer-to-peer interaction which thankfully again in nigeria there's at least a decent amount of peer-to-peer interactions but if i'm starting from scratch and i have no one to get crypto from i would have i would still have to use a centralized exchange right now there's [16:56] definitely strong efforts to kind of bridge that gap. [17:00] where [17:01] Maybe you can use a credit card to jump onto a deck. [17:04] But I think that's, I don't know how soon that's coming, but I know people are working on it. [17:10] Why do you think this hasn't been talked about in crypto media? [17:13] very good question uh okay it's a number of things one because it involves finance people don't necessarily want to just jump out and be like oh this is happening necessarily two and more importantly there's [17:26] going to be honest, there is just typically less interest in global health issues. So because of that, the range and the reach is going to be diminished by default, especially like Africa, for example. [17:37] So... [17:38] I think it's a mix of those two things. It's crazy. Even just doing searches on Twitter, I came up with very little. And all Crypto Twitter wants to do is tweet about crypto. So it's weird to me that this, as an active developing story, isn't being talked about. And also, to your point earlier about there being potentially a domino effect with other governments who have some insecurity about their currency and their currency in relation to...

[18:08] a free crypto market. It feels... [18:11] Like there could be huge implications. I'm sure at least one of the government right now is watching to see what happens. Yeah. To see if they should do the same thing. It's a lot. I'm going to take a short break and we'll be right back. It's time for a more open, inclusive and transparent financial system. A system that serves nearly everyone, everywhere, all the time. That's why we love today's sponsor Kraken. Kraken is a crypto platform that provides a super simple on-ramp to the world of crypto with a 24-7 support team. [18:41] you are. You can send funds easily and quickly to almost any part of the world. Plus, forget about waiting times and waiting lines. You can send, receive, and trade crypto anywhere near instantly. See what crypto can be at kraken.com backslash boys club. Non-investment advice. Crypto trading involves risk of loss. Transfers to a third party are not available on Kraken. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures, Inc., PBI, DBA, [19:11] slash disclosures. [19:14] What's your take on central bank digital currencies? Let's first give an explainer what central bank digital currencies are and how they relate to the story. [19:22] Right. So CBDC, the central bank digital currencies, are kind of a stable coin that is instead of being issued by, say, like a circle or like a tether, like one particular company, it's fully done by the government or by the central bank of a country. [19:37] So it would be... [19:38] It wouldn't be free flowing. It would literally just be that nation's dollar or that nation's currency.

[19:44] But... [19:45] Fully digital, usually blockchain based, not always blockchain based. [19:49] But 9 out of 10, it's like-- [19:51] you can actually interact with it. [19:53] in the same way or at least close to the same way you interact with any other crypto. [19:57] And how does it relate to the story? And what's your take on them? So obviously this is a controversial topic always. I'll first say the Bahamas has the first... [20:06] CBDC. It was called the Sand Dollar. And this happened... [20:10] my sense of time is completely shot but somewhere between 2018 and 2019 i believe but yeah it's it's interesting i think so for example if you take the bahamas or if you take like one of the small countries in the caribbean [20:22] Where [20:24] For us in particular, we're split off between different islands. We're in a cappelago, so we have a number of different islands. And because of a lot of our issues in the region, including very high unbanked numbers, banking relationships in general are terrible. People don't have particularly many options outside of cash. Even the ones who are banked, credit cards take a lot of fees. People who do remittances, they have to go to Western Union or one of the other ones that take heavy fees. [20:54] was mainly the reason why the government and the central bank went forward to to [21:00] get a CBDC in the first place because there were obviously like material needs that a digital dollar just made sense for. [21:07] And of course, there's the added benefit of... [21:09] with small countries, with small governments. [21:12] there's at least

[21:14] less chance of a how do i put this [21:19] of abusive power let's say like that but again obviously the the opportunity is still there there's just maybe less of a chance for that to happen now for a larger country let's say the us [21:32] if the US were to do a CBDC. [21:35] It would be pretty terrifying. [21:36] for a lot of noise. And the abuse of power would be possibly censorship, surveillance, culting transactions. Is that sort of the shape of it? [21:46] Yeah, I'd say that's accurate for sure. It's just, it would be giving a lot of power to the Federal Reserve at one time. On a technical level, it's very interesting. [21:56] especially the ones that are like, let's say blockchain based, but usually like private blockchains in some capacity. But I think the, the, [22:04] there's very strong dangers to it and in general I would say [22:09] There are [22:09] Absolutely. [22:11] countries, populaces that need a digital dollar in some sense. But I think stable coins have pretty much proved that you can go that route. I don't think... [22:20] the CBDC route is necessarily-- [22:24] Even if you take away the dangers of it, I think... [22:28] I don't want to use the word obsolete, but we've already seen so much happening in terms of [22:33] stablecoin development, stablecoin innovation, et cetera, et cetera, that that just seems like the better way to go at this point. Yeah. And it's not all fully centralized at the end of the day. Yeah.

[22:44] Thank you. [22:45] So... [22:46] That's that. An ongoing story. Really feel for these two dudes. A quote from Nadim Malkin. [22:55] Andrew Wallace's wife said, [22:58] This year, his Ramadan has started very differently, and my heart breaks thinking about him unable to break his past with all of us, missed his kid's first birthday. [23:07] these are just regular dudes who work finance. And so I just really feel for them. And, [23:13] It could have easily been so many people I know. And it's just chilling and feels... [23:19] disproportionate [23:20] I think. [23:21] to their level of influence in the company. So I guess [23:25] More to come. Any final thoughts? Unfortunately, I think this is a good reminder that [23:29] you know, working in crypto or crypto in general, like you think about [23:34] the cypherpunks that started this whole thing. [23:37] It's not all fun and games. The work that most of us are doing have strong effects on [23:44] the global economy on national economies. [23:47] And it's just important to like, [23:49] really take this seriously. [23:51] a poignant note to end on. I really appreciate you always. Thank you for jumping in last minute. [23:57] Always happy to. [24:04] So some things have happened. [24:07] Yeah, so here we are. It's just timestamping. It's Wednesday, March 27. No idea what time it is. Couldn't tell you where we are. What honestly, I had to look up the day. But that's where we're at midweek somewhere. And somewhere someday, someplace. Recorded the pod with Stefan on Friday afternoon. And then

[24:31] So much happened in the time between we recorded the pod and when we were intending to put it out on [24:37] Tuesday, and [24:39] So I have to do a quick update here, but basically two major developments to the story, and then we can talk about. [24:47] the sort of implications there one was that charges were filed in this case so up until now the two guys have been detained without being charged so they were detained without being charged for like a whatever three weeks a month but last week the nigerian government did file charges and the charges that were filed were [25:05] not for money laundering or terrorist financing. [25:08] But a third more elusive thing, tax evasion. So there's a whole list of like the details around the specifics around this tax evasion. But basically like the company evaded taxes and then also basically... [25:22] implied that they helped their customers evade taxes. So it's like at the company level, and then it's also at the customer level where people weren't paying taxes. [25:32] Can I ask you a quick clarifying question? [25:34] So these two men that were detained in Nigeria, [25:38] do they live in nigeria or were they visiting there they they had a scheduled meeting with the nigerian government one is a u.s citizen who i believe lives in [25:48] Georgia and one is a [25:52] a British and Kenyan citizen. He holds a dual, he holds two passports and he lives in Kenya. Okay. And they're saying that tax evasion, but it's not personal tax evasion. It's,

[26:04] company tax evasion. They charged the charges from... [26:08] the Nigerian government were leveled against finance, but also individually against these two guys. Not that these guys did tax evasion, but as representatives of the company. [26:18] Okay. [26:20] so I think I [26:23] That was surprising to me, the tax evasion part of it, because [26:26] There was a lot of other places that they could have gone with the charges, but the tax evasion thing feels interesting. So that's the first bit of news. The second bit of news is honestly insane. So the... [26:41] the man who lives in Kenya, who's also a British citizen... [26:45] Nadim Andrawala [26:47] He escaped... [26:49] On Friday. Insane. [26:50] Insane. How? [26:52] I don't know. From prison? [26:54] So they weren't in prison. [26:55] They were being detained in a guest house. [26:58] that now the sort of reporting around it is like they had a lot of luxuries living it being in this guest house. Mind you up until this week, they haven't been charged with any crime. So they were just being detained in this house. And they had security and all that. But they were like, for example, last you allowed to use the phone and [27:17] maybe the internet and so now they're saying like they gave him too too much of a leash and that that was how this man planned his escape but basically his minders the security team let him go to a nearby mosque for prayers it's ramadan and he escaped in that moment where he was in the

[27:42] then got away from his security guards. So that happened [27:46] I will say that has escalated things considerably because now Interpol's on his ass and like, it's become now like an international there's a internet, they're trying to get an international arrest warrant. And it's now just like, it's just escalated everything. And also he didn't have his passport because his passport was taken by the government when he was detained. So now it's a whole mystery also about [28:10] How did he get away? [28:12] If you didn't use have a space for where did you go? Where's he now? [28:15] No one knows. Wow. [28:16] Wow, wow, wow, that is wonderful. [28:18] so wild. But more than anything, the thing I just keep coming back to is... [28:22] these men should not be detained for the crimes their company has. I know. I don't know. It seems very strange. I know. It's crazy. It's really crazy. It's really crazy. It sets an insane precedent. It sets an insane precedent. And... [28:37] Yeah, I just now that he's escaped, [28:41] The other guy is still there. Yeah. Now the charges have been filed. Yeah. [28:45] Now he maybe will have an additional charge that's filed against him for escaping detainment. It all has... [28:53] Yeah, just become a lot more serious and I [28:56] like feel for his family because yeah he's yeah he's not a criminal and yeah he didn't personally do anything wrong and he probably just wants to get home to his family and now he's like [29:07] Crate it, I. [29:08] international man wanted man yeah so that's that i just want to give a huge shout out to premium times which is a nigerian outlet that is doing really really great reporting on this i'm going to link to them in the show notes a developing story

[29:22] Wow. [29:23] Thank you for your research and your time. Okay. That's that. [29:26] That's that. Bye. Bye.