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December 22, 2024

Flutterwave In More Trouble As Court Denies IGP’s Motion to Reverse Funds Stolen from Flutterwave Account

In a significant legal setback for Flutterwave, the Federal High Court in Abuja has refused the Inspector General of Police’s (IGP) request to compel banks to reverse billions of naira allegedly fraudulently withdrawn from the fintech company’s account. The court’s decision, delivered by Justice Peter Lifu, was based on concerns about procedural fairness and the right to a fair hearing.

The IGP’s motion, filed on July 17, 2024, sought to reverse withdrawals made from Flutterwave’s account at Wema Bank due to a system glitch that occurred between October 12 and 13, 2023. The IGP’s legal team argued that about 244 suspects had siphoned billions from Flutterwave’s account, transferring the funds to numerous bank accounts belonging to individuals who are either untraceable or difficult to locate.

However, Justice Lifu criticized the ex parte motion, noting that it breached Section 36 of the 1999 Constitution, which guarantees the right to a fair hearing. The judge emphasized that the banks involved had not been given an opportunity to respond to the claims before the court.

“Should I order them [the banks] to reverse the funds without hearing their side of the story, based on your one-sided account?” Justice Lifu questioned. He added, “If I grant the reversal, what is left of this case? You did not file a motion on notice. Once I reverse it, that is the end of the matter.”

The court’s decision highlights the importance of procedural fairness and the need for all parties involved to be heard. The IGP’s counsel, Victor Okoye, argued that the defendants were not traceable and that immediate action was necessary to recover the funds. Despite this, the judge insisted on the necessity of a motion on notice and proper service of legal processes to the banks.

The controversy stems from a 2023 system glitch on Flutterwave’s platform, which reportedly led to fraudulent transactions involving about N21.2 billion. Although Flutterwave initially reported a potential loss of N11 billion, the company claimed to have successfully blocked the breach and preserved N7.2 billion. The Inspector General of Police has since arrested several suspects linked to the fraudulent activities.

Impact on Customers and Industry

The court’s refusal to grant the reversal order has significant implications for Flutterwave’s customers and the broader fintech industry. Customers may face disruptions or delays in transactions if the stolen funds are not recovered promptly. The inability to reverse the funds could also impact Flutterwave’s reputation and financial stability.

This case underscores a growing trend of cybercrime in the fintech sector, highlighting vulnerabilities that can affect both service providers and their clients. The incident reflects a broader issue of security in digital transactions and the challenges financial institutions face in managing and protecting customer funds.

Legal and Industry Reactions

Legal experts have noted that the court’s emphasis on fair hearing and procedural correctness is crucial in maintaining the integrity of legal processes. Barrister Michael Okejimi and Barrister Opeyemi Owolabi both emphasized that while ex parte motions can be granted in urgent situations, the principle of fair hearing is fundamental. They agreed that the absence of a motion on notice and interlocutory injunction contributed to the court’s decision to reject the IGP’s request.

In the broader context, this case highlights the pressing need for improved cybersecurity measures and protocols within the fintech industry to protect against fraud and ensure prompt resolution of disputes. As Flutterwave navigates this challenging situation, the outcome could set important precedents for how similar cases are handled in the future.

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