Founded in 2016 by Iyinoluwa Aboyeji, Olugbenga Agboola, and Adeleke Adekoy, Nigerian fintech startup Flutterwave has grown tremendously. It became an African unicorn valued at over US$3 billion company by February 2022.
The company, which provides payment infrastructure for global merchants and payment service providers, raised US$250 million in its February fund-raising, Bloomberg reported.
However, cracks started appearing in Flutterwave’s armor around mid-2022.
Alleged money laundering
In July, a Kenyan court ordered a 90-day freeze of multi-currency bank accounts linked to transactions by Flutterwave Payment Technology Ltd. on suspicion of money laundering.
According to court documents, Flutterwave founders Olugbenga Agboola and Iyinoluwa Aboyeji were named as shareholders of the company that was registered in Kenya in February 2017.
Source: Bloomberg – July 28, 2022
Flutterwave denies money laundering and fraud allegations
Flutterwave has denied the fraud and money laundering claims leveled against it by Kenya’s Asset Recovery Agency (ARA), which investigates and recovers proceeds of crime.
The announcement came after the country’s pinnacle court blocked US$52.5 million in 62 accounts linked to Flutterwave and six other companies, which have been recipients of wire transfers from the fintech.
In court filings seen by TechCrunch, the ARA said it began investigations after suspicious activities and transactions in the seven companies were flagged on suspicion that they were proceeds of crime.
The ARA also said that the fintech was operating in Kenya without a valid license from the country’s monetary regulator, the Central Bank of Kenya (CBK).
Flutterwave dismissed the allegations as false.
“Claims of financial improprieties involving the company in Kenya are entirely false, and we have the records to verify this. We are a financial technology company that maintains the highest regulatory standards in our operations.
“Our Anti-money laundering practices and operations are regularly audited by one of the Big four firms. We remain proactive in our engagements with regulatory bodies to continue to stay compliant,” Flutterwave said in a statement shared with TechCrunch.
Source: TechCrunch – July 7, 2022
“No evidence of retail transactions from customers”
The ARA alleged that the funds in Flutterwave’s accounts were received from specific foreign entities. The money is then transferred to various accounts belonging to the six companies, TechCrunch reported.
The Kenya agency said that Flutterwave’s bank accounts were used as conduits for money laundering under the guise of providing merchant services. The fintech also had no evidence of retail transactions from customers paying for goods and services, it claimed.
The agency has petitioned the court to have the money forfeited to the government.
Suspected card fraud
ARA also said that Flutterwave was suspected of card fraud. It alleged that some of Flutterwave’s “transactions were done using cards issued by the same bank, at the same point, on the same day, raising suspicion of card fraud.”
But Flutterwave told TechCrunch that it processes payments for businesses worldwide, most of which are in large volumes.
The African unicorn added it has records to corroborate these transactions.
Flutterwave facilitates cross-border payment transactions of small to large businesses in Africa via one application programming interface (API), and also helps businesses outside the continent expand their operations in Africa.
Its list of clientele includes Booking.com, Flywire and Uber.
“Through our financial institution partners, we collect and pay on behalf of merchants and corporate entities.
“In the process, we earn our fees through a transaction charge, records of which are available and can be verified. As a business, we hold corporate funds to support our operations and provide services to all our customers,” Flutterwave told TechCrunch in the same July 7 report.
Waiting for a Kenya license
Meanwhile, Flutterwave is waiting for a response from Kenya’s central bank for a Payment Service Provider license it applied for in 2019, according to Bloomberg.
The African fintech unicorn has been operating in East Africa’s biggest economy, Kenya, via partnerships with lenders and mobile network companies.
“We have been in constant engagement with the Central Bank of Kenya to ensure that we provide all the requirements, and we look forward to receiving our license,” Flutterwave said in an emailed response to Bloomberg’s questions on July 22, 2022.
“We are committed to operating within the stipulated laws, regulations, and industry standards in Kenya,” the email added.
Kenya’s central bank Governor Patrick Njoroge had said that fintech companies Flutterwave and Chipper Cash are not licensed to operate as remittance or payments service providers in the country.
“They are not licensed to operate and therefore they shouldn’t be operating, and Chipper Cash we could also say the same,” Njoroge stated at a press briefing on July 28, 2022.
Source: Bloomberg – July 28, 2022
Bullying accusations by ex-employees
Former Flutterwave staff, Clara Wanjiku Odero, accused the company’s CEO Olugbenga Agboola of bullying and harassing her for years.
According to the April 11 TechCrunch article, she made the allegations in a Medium post and series of tweets.
In the blog post, Odero recounted how a series of undescribed events led her to quit her job as Head of Implementation (Rest of Africa) in 2018.
When the time came for her case to be settled, she claimed the company refused to do so.
However, upon her threats to sue the company, which she claimed led to various employees from the company “asking to talk and resolve this amicably,” Flutterwave finally paid her dues, she said in the post.
Wanjiku sued Flutterwave for damages and won a settlement, according to her blog.
However, she appealed the case after deeming the payment inadequate as compensation.
This was corroborated in a recent interview granted by CEO Agboola and released hours before Wanjiku published her Medium post.
“An ex-employee who led one of our country expansions sued us for negligence and emotional trauma for not removing their name as the contact person in the country.
“So anytime there was a merchant enquiry, they were called. They said this was emotional harassment,” Agboola revealed.
“We tried to resolve this amicably, but it was impossible. They asked for $900,000 to quash the lawsuit.
“We refused because we didn’t believe $900,000 in damages represented the cost of the alleged negligence.”
Agboola added, “They proceeded with the lawsuit, and the judge awarded them an equivalent of $2,500 for damages. When it was time to cut the check, they declined it and said they’d appeal.”
Source: TechCrunch – April 5, 2022
Lawsuit from another ex-staff: Allegations of being denied a stock
Flutterwave ex-employee Gbemisola Ajayi had sued the company for US$800,000, according to an August 11 Business Insider Africa article.
She argued that the amount is how much she lost when she was denied a stock award entitled to her after she left the company in Q1 2020.
In response to the suit, Flutterwave said Ajayi did not meet the conditions for the stock award.
For more reports involving alleged CEO controversies, check out: Lessons From the Ankiti Bose and Zilingo Fallout
Moving forward: Increasing staff size by 200
Despite facing alleged scandals, Flutterwave has moved forward with its inaugural Graduate Trainee Program by hiring 200 trainees. This has grown its employee base by 38%, Yahoo Finance reported on August 11.
The paid program aims to nurture young Nigerians by upskilling them with technical and soft skills, exposing them to the company’s solutions and products, and giving them experience working at an international organization.
Considering an IPO amid scandals
The recent controversies have also reportedly not stopped Flutterwave from considering an Initial Public Offering (IPO) in the U.S. and Nigeria, according to Business Insider Africa.
The IPO would see Flutterwave’s shares listed on the New York Stock Exchange and possibly the Nigerian Exchange.
Sources familiar with the situation told Bloomberg that the recent recruitments into key positions at Flutterwave were all in preparation for the IPO.
Flutterwave had recently hired Oneal Bhamban, a former VP at American Express, as its new Chief Financial Officer. Also, the company hired Gurbhej Dhillon, a former MD at Goldman Sachs, as its new Chief Technology Officer.
But the planned IPO could be delayed given the generally bearish sentiment across global stock markets. Flutterwave’s recent reputation-damaging allegations could also delay the IPO.
What’s next for Flutterwave?
The Nigerian fintech unicorn could still be pushing ahead with plans to list the company – sooner or later. Despite the recent alleged scandals, Flutterwave is still Africa’s largest startup, with a valuation of over US$3 billion.
After raising US$250 million in a Series D round (February 16, 2022), and US$170 million in Series C (March 2021), Flutterwave is on steady grounds financial-wise.
There have been countless failure stories in fintech. However, Flutterwave isn’t destined to fail if it can survive the scandals.
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