Court Orders Freezing Of Opay, PalmPay, FairMoney Accounts Over Unlawfully Transferred N139.6m

The Federal High Court in Abuja on Monday issued an interim freezing order against several accounts in Fair Money Microfinance Bank Ltd, Palm Pay Limited, and Opay Digital Services Limited, directing the organizations to reverse N139,630,000 credited to some of their customers and account holders as a result of a “system glitch” at TAJ Bank Ltd.

The order was made following a motion ex parte filed by Taj Bank Ltd and six of its customers on July 23, 2024, in suit number FHC/ABJ/CS/1018/2024 against the three organizations.

Nigerian Interbank Settlement System Plc was designated as the fourth respondent.

In their originating summons and motion ex parte, TAJ Bank’s legal team urged the court to hold that based on the Central Bank of Nigeria’s Regulatory Framework for Banking Verification (BVN) Operations and Watchlist for the Nigerian Banking Industry, October 2017, any money that illegally enters the accounts linked to the Bank Verification Numbers (BVN) of any institution’s account holders through suspicious debits and credits should be immediately returned to where the money was originally domiciled.

In his affidavit in support, Unit Head of the Investigation and Fraud Management Unit, Taj Bank Limited, Muhideen Olujinmi, stated that one of the goals of the aforementioned Central Bank of Nigeria Regulations is to, among other things, ensure the effectiveness of Know Your Customer (KYC) principles and the promotion of a reliable payment system, as well as the reduction of fraud incidences and the safeguarding of depositors’ funds to boost public confidence in the banking industry.

According to him, following a system glitch on Taj Bank’s server, certain individuals illegally initiated multiple successful debit transactions and withdrew and transferred funds from the 2nd to 7th Plaintiffs’ accounts into several accounts held by the 1st, 2nd, and 3rd Respondents.

He argued that the cash had been unlawfully transferred into multiple accounts held by the first, second, and third respondents.

He stated further, “That certain individuals took advantage of this glitch to carry out several transactions exposing TAJ Bank and its customers to a humongous liability to the tune of N139,630,000.00 received in several accounts domiciled with FairMoney, Opay, and PalmPay.

“That upon realizing this glitch, an immediate complaint was made to the 1st to 4th Respondents, and the said Respondents placed a post-no-debit instruction (debit freeze) on the subject accounts to avoid further dissipation of the Plaintiffs’ money.”

He explained that if all of the accounts listed in its exhibits belonging to the perpetrators of the alleged fraud are not urgently blocked or placed on no debit restriction and the amount unlawfully obtained is reversed, they will continue on a spending spree and further dissipation of funds belonging to TAJ Bank customers.

He noted that, in accordance with relevant financial legislation, financial platforms have the authority to block, freeze, and impose a post-no-debit on all of the account numbers specified in order to protect and secure depositors’ funds.

“The Plaintiffs have been greatly affected by the resultant effect of the system glitch, and unless this application is granted, the Plaintiffs will be further subjected to untoward hardship and dire financial loss,” he added.

TAJ Bank subsequently asked the court to order FairMoney, Opay, and PalmPay to reverse and refund the sum of N139,630,000.00 wrongfully debited from six of its customers’ accounts due to its system glitch, adding that they are wrongful and illicit debits transferred into the 1st-3rd Defendants’ customers’ accounts.

In its motion ex parte, TAJ Bank’s legal team sought an order of interim mareva injunction (freezing order) mandating the 1st, 2nd, and 3rd Respondents to comply with the CBN’s guidelines by restricting and reversing the sum illegally received and transferred from the account of its customers to the accounts of the identified beneficiaries respectively (following the system glitch in the 1st Plaintiff/Applicant’s server), pending the hearing and determination of the substantive suit.

On July 26, 2024, Justice Peter Lifu granted TAJ Bank’s interim request, indicating that the freezing order would remain in effect while the application was heard and decided.

As requested by TAJ, the judge further ordered the 1st, 2nd, and 3rd Respondents to disclose under oath to the Court the sums in the credit of the specified account holders of their institution within 7 days of the order’s service.

The court also ordered TAJ Bank to enter into a fresh undertaking to protect or insure FairMoney, Opay, and PalmPay against any loss in the event of any emerging facts as to the inappropriateness of the interim orders granted.

The court then adjourned to August 12, 2024, for a hearing.

FairMoney, Opay, and PalmPay did not have legal representation in court at the hearing on Monday.

TAJ Bank’s lawyer, Rilwan Idris, told the judge that in compliance with his order, his clients have filed an affidavit to insure the respondents from any damage.

That affidavit was filed on July 29, 2024, and I can confirm that all of the respondents have received both the originating processes and the orders,” he said.