A significant legal action has been initiated in the Federal High Court of Nigeria, Lagos Judicial Division, shedding light on the potential vulnerabilities within the nation’s electronic funds transfer systems. Pyramid Microfinance Bank LTD has filed an originating summons against a staggering 47 other financial institutions. This legal move seeks the court’s intervention to recover a substantial sum of N1,493,150,513.
According to the originating summons, Pyramid Microfinance Bank contends that this massive financial loss occurred due to a system glitch that resulted in wrongful and unlawful transfers to the customers of the defendant banks. The plaintiff asserts its rightful ownership of these funds and is seeking the court’s assistance in tracing and recovering them from any account or source where they can be found.
The core of the legal questions presented to the court revolves around whether the court can grant the reliefs sought by Pyramid Microfinance Bank against the other banks, especially in light of the Central Bank of Nigeria (CBN) regulations on instant (inter-bank) electronic funds transfer services. The originating summons specifically mentions several CBN circulars and their dates, implying that the plaintiff believes the defendant banks have obligations under these regulations to assist in the recovery. Furthermore, the court is asked to determine if Pyramid Microfinance Bank is indeed entitled to the various declarations and orders they are requesting.
The reliefs sought by Pyramid Microfinance Bank are comprehensive and indicate the extent of the challenge they face in recovering the lost funds. These can be broadly categorized into:
Declarations:
- A declaration that Pyramid Microfinance Bank is the beneficial owner of the N1.49 billion lost due to the system glitch and wrongful transfers.
- A declaration that the defendant banks, upon receiving the transferred funds, were bound by CBN regulations to watch-list the Bank Verification Numbers (BVNs) of the customers who benefited and to ensure the repayment of these funds to Pyramid Microfinance Bank.
- A declaration that the defendant banks should arrest and hand over customers listed in an attached exhibit (EXHIBIT A) to law enforcement agencies upon sighting them, and notify Pyramid Microfinance Bank of the wrongful withdrawal.
- A declaration directing the defendant banks to perpetually watch-list the BVNs of account holders in EXHIBIT B until the funds they received are fully recovered or until Pyramid Microfinance Bank requests the removal of a compliant account holder’s BVN.
Orders:
- An order directing each of the 47 defendant banks to individually transfer all sums available in the accounts listed in EXHIBIT A and EXHIBIT B to Pyramid Microfinance Bank [Originating summons.pdf].
- An order compelling the defendant banks to disclose all relevant customer information, including BVNs, account balances, contact addresses, emails, phone numbers, and account opening packages, for those who benefited from the alleged fraud.
- An order mandating the defendant banks to arrest and handover customers listed in EXHIBIT A to law enforcement agencies.
It’s noteworthy that the originating summons cites Sections 6(6) and 36(1) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), Order 26 Rule 1, 2 and 3 of the Federal High Court Rules 2019, and Section 56 (1) and (2) of the Banks and Other Financial Institutions Act (BOFIA) 2020 as the legal basis for this action. This underscores the seriousness with which Pyramid Microfinance Bank is pursuing this recovery.
While this originating summons details the claims of Pyramid Microfinance Bank, it’s interesting to note related legal actions involving similar circumstances. For instance, Union Bank of Nigeria PLC initiated suits few weeks ago, also concerning alleged wrongful and fraudulent transfers. In those cases, the court issued Preservatory Orders of Interim Injunction, mandating the respondent banks to immediately place a Post No Debit restriction on the accounts of the listed beneficiaries believed to have received the erroneously transferred funds. These orders aimed to prevent further dissipation of the funds pending the hearing and determination of the suits. It remains to be seen if Pyramid Microfinance Bank has sought or will seek similar interim measures in their case.
While the documents before the court focus on the recovery of funds following these incidents, the persistent public suspicion and theories surrounding such events cannot be ignored. There have long been concerns about the possibility of insider involvement and deliberate manipulation within banking systems to illicitly acquire funds, with some theories suggesting that crypto peer-to-peer (P2P) merchants are particularly susceptible targets for such activities. These suspicions often arise from the opacity of digital financial transactions and the perceived power imbalance between financial institutions and individual account holders.
The legal actions initiated by Pyramid Microfinance Bank and other banks in the past bring these issues into the legal arena, seeking clarity and accountability for the movement and loss of funds. Whether these incidents are solely attributable to system errors or if they involve more complex underlying issues, as suggested by public theories, remains to be seen. The outcomes of these cases could potentially shed more light on the security and integrity of electronic fund transfer systems and the extent to which financial institutions are held responsible for discrepancies, regardless of their cause. The resolution of these legal battles will be closely watched by the banking sector, account holders, and indeed, the often-targeted crypto P2P trading community.
