The Flutterwave crisis: why the fintech provider is now frozen in kenya

As one of Africa’s biggest fintech payment providers, Flutterwave has been a true success story since its formation five years ago.

The Nigerian start-up raised $170 million in an investment round last year, the largest ever for an African firm, and recently hit a valuation of $1 billion, earning it Unicorn status.

Yet its short history has also been marked by scandals, and now the Kenyan government has gotten involved. Here’s how.

What is Flutterwave?

Flutterwave is part of the wave of fintech banking that has swept across Africa over the past few years. Based on online payments that make everything from paying for online goods or buying a digital lottery ticket easier, it has become a key tool in the everyday life of many Africa

The highest-valued African start-up in history, it facilitates cross-border payment transactions for individuals and African businesses via an easy-to-use API. Operating in over 30 currencies, it has made more than half a million payments since its formation in 2016.

However, despite its success, it has also attracted its fair share of scandals. Several former employees have alleged that the company used bullying practices against them, while at least one female member of the staff reported unwanted sexual advances from her boss.

The accusations prompted a response from company CEO Olugbenga Agboola in spring 2022 where he firmly denied any wrongdoing within the company, but it didn’t stop the accusers from pursuing court cases against the firm.

The recent action from the Kenyan government, though, comes after a series of allegations regarding their financial conduct. In April, Agboola and senior executives were accused of insider trading where they were said to have sold shares at a lower price before raising venture funding to hike the price back up.

Further accusations of financial misconduct have led to severe sanctions from the authorities within the markets that Flutterwave operates in, threatening its integrity as a firm.

Why has the Kenyan government frozen Flutterwave’s accounts?

The High Court in Kenya froze more than Ksh 6.2 billion ($52.5 million) belonging to Flutterwave and other Kenyan accounts following a request by the Assets Recovery Agency (ARA).

According to investigations, the ARA established that 29 bank accounts with Guaranty Trust Bank, 17 with Equity Bank, and 6 with Ecobank were suspicious, and the money inside could be proceeds of money laundering. The billions of shillings were deposited in different bank accounts to conceal the funds’ nature, source, and movements.

While the firm claimed that the money was there in exchange for providing merchant services, the authorities have found no evidence of retail transactions from customers.

On top of this, the agency found that Flutterwave was providing a payment service platform to customers without authorization from the Kenyan Central Bank, a severe breach of financial rules.

The Flutterwave freezing is part of a wider investigation that includes several other Kenyan companies. Upon his ruling, the court judge said that he was ‘convinced beyond any reasonable doubt’ that there are grounds to believe that the funds deposited in the Kenyan accounts were proceeds from illegitimate sources.

What will Flutterwave do next?

Flutterwave’s response to the ruling was emphatic. Hinting at a witch hunt by the Kenyan authorities, it announced that it is launching its own investigation into the motive of the claims made against it.

A company statement affirmed its commitment to the ‘integrity of the ecosystem’ and its stakeholders, and that it is striving to ‘have the records straightened’.

Yet, despite its bullish claims, there can be little doubt that these events are a huge blow to the company’s future, and one which could be fatal.

Financial firms rely on customer confidence more than anything else, so to acquire the reputation for financial misdealings, whether the allegations are true or not, is certain to negatively affect their standing in Kenya, its native Nigeria, and beyond.

History shows that companies rarely bounce back from such heavy accusations. Even if Flutterwave successfully fights the court action, it’s highly unlikely that it will recover from its aftermath. It could be that this financial start-up as its customers know it quickly becomes a thing of the past.