The Federal Inland Revenue Service (FIRS) has initiated a significant legal action against the cryptocurrency exchange platform, Binance, at the Federal High Court in Abuja, seeking substantial financial compensation for alleged economic losses and tax evasion in Nigeria. The tax agency has requested Binance to pay an astounding $79,514,055,594.40 and N231 million for economic damages purportedly caused by its operations within the country. Additionally, FIRS is demanding a $2,001,000,000 penalty for alleged tax evasion spanning the years 2022 and 2023.

These formidable financial demands encompass a 10 percent penalty for the non-payment of income tax for the specified years, along with a 26.75 percent interest rate, calculated from January 1, 2023, and January 1, 2024, respectively. The Central Bank of Nigeria (CBN)'s Research Department, tasked in May 2024 to assess the financial impact of Binance's activities, independently estimated economic losses amounting to $79,514,055,559.44 over a six-month period in early 2024, corroborating the scale of the FIRS's claims.

The core of the FIRS lawsuit rests on accusations that Binance violated Nigerian laws by operating without proper registration for tax compliance and causing significant economic detriment. Jimada Mohammed Yusuf, a member of the Special Investigation Team from the Office of the National Security Adviser (ONSA), underscored these infractions in an affidavit, stating Binance's liability to the Federal Government for the stated sums due to engaging in foreign exchange and other trading instruments without authorization. FIRS asserts that Binance operated in secret despite a substantial economic presence in the country.

Specifically, the lawsuit cites breaches of key Nigerian statutes, including the Companies Income Tax (CIT) Act, the Federal Inland Revenue Service (Establishment) Act 2007, the CBN Regulatory Framework for Mobile Money Services, and the CIT Significant Economic Presence (SEP) Order. The SEP Order, signed by former Minister of Finance, Budget, and National Planning Mrs. Zainab Shamsuna Ahmed in May 2020, stipulates that a foreign company has a significant economic presence in Nigeria and is liable for taxation if it generates an annual gross turnover of at least N25 million or its equivalent from digital activities, among other criteria.

The legal proceedings against Binance have seen several developments. Initially, FIRS began a trial concerning alleged tax evasion, accusing the platform of facilitating cryptocurrency transactions and asset remittances for Nigerians without deducting necessary Value Added Tax (VAT). In June 2024, the FIRS amended its lawsuit, dropping tax evasion charges against two senior Binance executives, Tigran Gambaryan and Nadeem Anjarwalla (who fled detention), and refiled the case with Binance as the sole defendant. The amended suit specifically alleges Binance’s failure to collect and remit various taxes, particularly VAT and Company Income Tax (CIT), as mandated by Section 40 of the FIRS Establishment Act 2007 (as amended).

Further exacerbating the charges are claims regarding Binance's operational history in Nigeria. According to Yusuf's affidavit, the federal government discovered that Binance had been operating for over six years without official registration. This unregistered status was allegedly confirmed by Gambaryan and Anjarwalla during a meeting with the Securities and Exchange Commission (SEC) in 2024. Yusuf's account also revealed that for the year 2023, Binance reported approximately 386,256 active users from Nigeria, generating a trading volume of $21.6 billion and a net revenue of $35.4 million, indicative of its significant scale in the country.

The list of alleged law breaches extends to offering financial services without requisite licenses, violating the Money Laundering Act, and providing unauthorized currency speculation services. Yusuf further stated that Binance executives allegedly admitted to unlawfully listing and trading the Naira but claimed to have delisted the currency following an ONSA investigation. However, officials later discovered this claim to be false, with Naira still accessible on the platform. The ONSA also reported that Binance has consistently refused to provide records of its business activities over the past six years, even after a Federal High Court order mandating disclosure of such information to FIRS via the Economic and Financial Crimes Commission (EFCC) as of September 2024.

This lawsuit is not an isolated incident; FIRS has another pending case against Binance for tax evasion. The broader context includes the Federal Government of Nigeria accusing Binance of involvement in disrupting the Naira currency following its sudden crash in May 2023, which prompted separate lawsuits from both the EFCC and FIRS concerning alleged tax evasion, money laundering, and foreign exchange violations.