How Nigeria's Internet Fraudsters Built a $760 Million Bitcoin Empire

It is safe to say that Bitcoin and crime do not originally belong in the same sentence. But it was, at the onset, fated to become a willing tool in the hands of criminals.

Since the infamous Mt. Gox era, Bitcoin, popularly known as ‘internet money’, has been invariably used by anonymous criminals across the world to commit a series of heinous crimes ranging from money laundering to kidnapping.

Nigeria, Africa’s largest Bitcoin market, was destined to become a peculiar crime scene as Bitcoin’s influence spread across the world. This not only accounted for the rapid growth of Bitcoin in Africa itself but also revealed how a $760 million crypto empire consequently emerged from the interplay between Nigeria’s internet fraud syndicate known locally as ‘Yahoo boys’, and Bitcoin, their newly found obsession.

As it grew in popularity, Bitcoin's enduring promise of absolute anonymity was but a recipe for crypto-related scams in which Nigeria’s internet fraudsters actively participated. The modus operandi was fairly simple. It involved laundering or stashing away ‘dirty money’ and using the Bitcoin-fiat payment gateway offered by various deposit money banks(DMBs) to cash out the illegal proceeds.

Although the peculiar nature of the crypto-related crimes that are committed using Bitcoin is monetary, it is extremely difficult to find a piece of incontrovertible evidence linking a ring of Nigerian Bitcoin fraudsters to either the Silk Road scandal or the Mt Got era, when Bitcoin's criminal history is mostly believed to have begun.

However, as it happened in the Silk Road era that saw the genesis of how Bitcoin is leveraged by criminals, the country's internet fraudsters quickly gained a mastery of how to take advantage of Bitcoin in their criminal dealings, and by the time virtually everyone knew what Bitcoin symbolises, the rest became history. This experience with a new crime tool created the obsession that was required to popularise Bitcoin and build a large network of a million user base within the country and beyond.

The Early Days Of Bitcoin Trading In Nigeria

The growing popularity of Bitcoin and cryptocurrencies naturally caught the fascination of many young people in Nigeria. But a sizable minority of the youth population that was already given to all shades of internet fraud brought an interesting twist to it by becoming the country’s biggest crypto traders overnight. These new Bitcoin traders, mostly young men with basic computer skills, gravitated toward Bitcoin to build an internet wall for their illegal proceeds, and in Bitcoin they found a safe lodgement for it.

Even though they were keenly aware of the risks holding Bitcoin and cryptocurrencies presents, they exuded the stamina to endure even the worst crypto winter as long as the law was not trying to catch up with them.

At its height, the Nigerian crypto market accumulated a massive Bitcoin fortune outside the monetary province of the government, so much so the Federal Inland Revenue Service, the country’s chief tax collector, could not devise a means to either tax or seize the illegal Bitcoins were openly traded on the various crypto exchanges.

The volumes of daily Bank-assisted Bitcoin transactions reached a record $760 million in 2021, cumulatively producing a new industry where, although unregulated, an economic activity with a potential revenue stream was taking place, and in this chaos that characterized it, Nigerian banks in partnership with crypto wallet providers were raking in millions of Naira in crypto transactions until the Central Bank of Nigeria(CBN) issued a circular banning crypto servicing within the Nigerian banking sector on the 5th of February,2021.

The Path To Nigeria’s $760 Million Bitcoin Market

There is no official record of the day Nigeria reached its first one million Bitcoin users, but the rise of Bitcoin trading was unprecedented. Many individuals and businesses bought Bitcoin, perhaps, to augment their income, and what’s more, the interest in it began to wax stronger by the day. Moreover, Bitcoin received scarce attention in local news until the story of Aisha Ardo, a Kidnapped Nigerian citizen who was released after her father paid $15,000 in Bitcoin, made headlines.

By the time Bitcoin was old enough to be a tea party gist in the Nigerian business circle, a lot of people were already buying, trading, and selling it online. As more and more people began to discover its essence and its profitability, Bitcoin moved on with the tainted reputation that Nigeria’s internet fraudsters had already given to it.

The number of Bitcoin owners in the country grew rapidly and its Bitcoin market experienced a boom that caught the world’s attention. But it took an FBI investigation to uncover the truth behind the country’s Bitcoin success. In the investigation, it was revealed that between $200- $300 million dollars was illegally obtained on a weekly basis from the US and other Western countries by Nigeria’s fraud syndicate, the Yahoo boys. The investigation further revealed that most of the stolen funds came from the Covid-19 stimulus package, a large part of which the syndicate fraudulently obtained.

With a vast Bitcoin user base, Nigeria eventually became a key Bitcoin country in the world, sharing the same stage with countries such as the US, India, China, etc. And, if there is any lesson that becoming a thriving Bitcoin market has taught Nigeria, it is that the road to Bitcoin’s adoption has never been smooth anywhere in the world due to the propensity of criminals to hijack Bitcoin for selfish gains.

Nigeria’s own share of Bitcoin’s dirty history produced a vast market that earned it a spot in the top ten ranking of countries with the highest number of Bitcoin traders and it has consistently made the list as the number one Bitcoin destination in the whole of Africa, leaving countries like Ghana, Kenya and South Africa far behind.

Conclusion

Bitcoin is not the villain. It is, on the contrary, a technology that allows the exchange of value between two people without an intermediary. Its dark side is present in the way criminals across the world have continued to use it to launder illegal proceeds. Nigeria‘s internet fraudsters known as Yahoo boys developed an obsession with it as Bitcoin and crypto trading became a way to keep stolen funds outside the banks to avoid detection.

The unintended outcome of the long-range issue of crypto fraud involving Yahoo boys is the rapid growth of Nigeria’s crypto economy which, as of today is highly exposed to massive crypto risks but which has a huge potential to grow even bigger in a favourable regulatory landscape where consumers’ protection is king.