From a fraudulent betting firm in Nigeria to aggrieved customers and a Nairobi High Court order, here’s how Flutterwave accounts were frozen in Kenya.
Last week, Nairobi High Court Judge A. Mabeya placed a 14-day lien on 45 Flutterwave bank accounts at Access Bank, Equity Bank, Guaranty Trust Bank, United Bank of Africa, Ecobank and 10 accounts of mobile money at Safaricom PLC. The lien comes following a petition by Morris Ebitimi Joseph, on behalf of 2,468 investors who were defrauded by 86 Football Technology Ltd (86FB, 86W and 86Z), a Ponzi scheme posing as a sports betting company. Joseph and the other investors say Flutterwave and 86FB teamed up to defraud them of $12.04 million.
In a response to TechCabal, Flutterwave said, “Some accounts have been frozen, yes, but it’s a matter of procedure in such civil cases. This is an unsubstantiated claim from the report because last year, during routine checks, we noticed that some companies were using our platform to process payments for the company called 85FB/86Z. We have proactively notified merchants to stop processing and suspend their use of Flutterwave. We have also reported the matter to law enforcement in Nigeria. We are pursuing all due legal proceedings in Kenya, including providing all necessary documentation as we work to resolve these matters.”
Accusations and clarifications
In 2022, 86FB accused Flutterwave of maliciously freezing its accounts. This payment company [Flutterwave] has maliciously frozen our funds and intends to seize the funds and extort us by cooperating with the local police. 86FB has never succumbed as we have tried our best to protect the rights and interests of every user, but the other party has a strong background in Nigeria. We can’t fight it, now 86FB can’t withdraw money normally, the company said after it was exposed as a Ponzi scheme.
At the time, Flutterwave answered in a tweets, stating that 86FB has not been registered or approved by Flutterwave. Flutterwave also disclosed that during its investigation, it identified Flutterwave direct merchants who were processing transactions for 86FB without our approval or authorization to do so on the Flutterwave platform. It added that it has suspended merchants’ use of the Flutterwave platform.
Payment processors and Ponzi schemes
It wasn’t the first time that Flutterwave had intervened by suspending a Ponzi scheme from using its platform. In 2020, as Racksterly (another Ponzi scheme) was unraveling, Paystack and Flutterwave blocked Racksterly from using their platforms to process payments. Olugbenga Agboola, CEO of Flutterwaves, told TechCabal that the restriction was applied to protect customers from fraud.
The merchant’s business model doesn’t support this type of transaction they were doing, Agboola explained. And so we saw that customers would be scammed on our platform. Flutterwave has also refunded all Racksterlis subscriber transactions made in January 2020.
Flutterwave also said it suspended in May 2022 a merchant who had used its platform to handle 86FB transactions without having the necessary authorization. He also added that this was done after a routine check of traders, through which 86FB’s operations were discovered to be a Ponzi scheme.
A first test and a success
Also, this isn’t the first time aggrieved investors in 86FB have attempted to sue Flutterwave in Kenya for the loss of their invested funds. Although the fraud took place in Nigeria, investors tried to join the Kenyan Asset Recovery Agency (ARA) application to prevent Flutterwave from transferring or withdrawing the funds in three bank accounts, including two in UBA and one in Access Bank, and 19 Safaricom M- Pesa pay bill numbers. Eventually Flutterwave was cleared of any wrongdoing and investors lost their bid to get a share of the frozen funds from ARA.
However, with this new court case, 86FB’s investors were finally able to get a lien on Flutterwaves accounts and may be able to recoup their losses. After the 14-day privilege expires on June 21, the parties will reconvene with Judge A. Mabeya for further guidance on how to proceed with the case. The judge will also decide whether to extend the freezing orders.
This new court case comes as Flutterwave continues its bid for a paid license in Kenya. Flutterwave responded by suing 86FB on defamation charges.
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