Contributor: Iyanuoluwa Animasaun
Introduction
The rapid growth of digital assets, including cryptocurrencies, tokens, non-fungible tokens (NFTs), and online investment platforms, has transformed modern commerce. These innovations have created significant economic opportunities, expanded access to financial markets, and encouraged broader participation in investment activities. At the same time, they have generated a new category of disputes that are often, and sometimes incorrectly, characterised as fraud. This development has exposed the limitations of criminal law in addressing transactions that are fundamentally contractual or investment-related. In Nigeria, the challenge is particularly evident, as law enforcement agencies frequently intervene in digital asset disputes without adequately distinguishing between civil liability and criminal culpability, often to the detriment of innocent parties and the rule of law.
This article examines the legal and conceptual challenges arising from the criminalisation of digital asset disputes in Nigeria. It analyses the existing statutory framework, distinguishes between contractual failure and criminal fraud, and advocates a principled approach that safeguards investors while preserving the integrity of the criminal justice system.
Legal Framework: Governing Digital Assets in Nigeria
Nigeria’s regulatory approach to digital assets has evolved considerably over the past decade, though it remains characterised by some uncertainty. For several years, the Central Bank of Nigeria (CBN) adopted a restrictive stance, culminating in its February 2021 circular prohibiting banks and other financial institutions from facilitating cryptocurrency transactions. The CBN subsequently reversed this position through its December 2023 Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers, which reintroduced virtual asset service providers (VASPs) into the formal banking system under a regulated framework.
On the securities front, the Securities and Exchange Commission (SEC) introduced the Rules on Issuance, Offering Platforms, and Custody of Digital Assets in 2022, which were subsequently revised in 2024. These Rules classify certain digital assets as securities and subject their issuers, exchanges, and intermediaries to registration, disclosure, and compliance requirements under the Investments and Securities Act (ISA) 2007. In addition, the Finance Act 2023 imposed capital gains tax on the disposal of digital assets, further reflecting legislative recognition of such assets as legitimate forms of property and investment.
Despite these regulatory developments, Nigeria has yet to enact a comprehensive legal framework governing digital assets. Consequently, authorities frequently rely on existing criminal statutes when disputes arise within the digital asset ecosystem. These statutes include the Advance Fee Fraud and Other Fraud Related Offences Act 2006, the Economic and Financial Crimes Commission (Establishment) Act 2004, and the Cybercrimes (Prohibition, Prevention, etc.) Act 2015, alongside the common law principles governing fraud. However, these legal instruments were not designed to regulate digital assets or blockchain-based transactions. Their application to cryptocurrency-related disputes therefore often creates analytical and doctrinal difficulties, particularly where contractual breaches or investment losses are misconstrued as criminal conduct. This distinction lies at the heart of the issues examined in this article.[1]
The Fraud Threshold: Distinguishing Criminal from Civil Wrongs
Fraud, whether under the common law or Nigerian statutory frameworks, requires proof of specific elements: a false representation of fact made knowingly or recklessly, with the intention of inducing another person to act to their detriment, resulting in actual loss. The requirement of mens rea—the guilty mind—is not a mere technicality. Rather, it constitutes the moral and constitutional foundation that distinguishes criminal fraud from a failed commercial transaction or investment.
The Supreme Court reaffirmed this principle in FRN v. TALAL,[2] where it held that criminal liability for obtaining property by false pretences arises only where the prosecution proves a deliberate and dishonest misrepresentation at the time of the transaction. A person who genuinely believes in the truth of a representation, or who enters into a transaction in good faith that subsequently fails, does not possess the requisite mens rea for fraud. Despite this settled position, parties and law enforcement agencies frequently overlook the distinction when digital asset transactions collapse or fail to yield the anticipated returns.[3]
This misconception is particularly prevalent within the digital asset ecosystem. For example, an investor who purchases cryptocurrency through an exchange platform that later becomes insolvent or illiquid may lose access to funds. Such a loss reflects the materialisation of commercial risk rather than evidence of fraud. Similarly, where a token issuer raises funds through a public or private token offering but fails to deliver the proposed project within the projected timeframe due to technical, regulatory, or market constraints, the resulting dispute may give rise to civil remedies for breach of contract or misrepresentation. However, absent proof of intentional deception at the point of investment, criminal liability cannot arise. Likewise, a peer-to-peer cryptocurrency trader who fails to complete a transaction after receiving payment due to price volatility, technical difficulties, or a subsequent change of position may incur civil liability, depending on the circumstances. Still, the conduct does not automatically amount to fraud.
The persistent failure to recognise these distinctions has contributed to the growing phenomenon commonly described as the “criminalisation of civil disputes.” The Court of Appeal condemned this practice in ADINOYI v. FRN,[4] cautioning that a party’s failure to fulfil a contractual or commercial obligation does not, without more, transform a civil dispute into a criminal offence. Criminal law must remain reserved for conduct involving genuine criminal intent; otherwise, it risks becoming an instrument for enforcing private commercial claims rather than a mechanism for punishing culpable wrongdoing.[5]
Law Enforcement Overreach in Digital Asset Disputes
A troubling pattern has emerged in Nigeria, in which parties to digital asset transactions increasingly resort to the Economic and Financial Crimes Commission (EFCC), the Nigeria Police Force, and the Department of State Services as a first response to disputes that are fundamentally civil or commercial in nature. Rather than pursuing contractual or investment-related remedies through the appropriate civil processes, complainants frequently seek criminal investigations, arrests, and prosecutions. This practice, often described as the use of “criminal process as a debt recovery mechanism,” weaponises state power in a manner that is both legally and constitutionally questionable.
Although the EFCC Act grants the Commission broad powers to investigate and prosecute economic and financial crimes, those powers are not without limits. Section 46 of the Act defines an economic and financial crime as a non-violent criminal and illicit activity committed for the purpose of unlawfully acquiring wealth. A failed digital asset transaction, without more, does not automatically fall within this definition. The mere loss of money, even where substantial sums are involved, does not, in itself, transform a commercial disagreement into a criminal offence. Consequently, where a dispute arises solely from the non-performance of contractual obligations, investment losses, or business failure, the criminal jurisdiction should not be invoked in the absence of evidence demonstrating fraudulent intent or other criminal conduct.
The courts have consistently affirmed this position. In Yahaya v. FRN, the Court of Appeal reiterated that the EFCC cannot properly deploy its statutory powers to resolve ordinary commercial disputes merely because one party seeks to characterise the dispute as a financial crime. The decision reflects a broader judicial reluctance to permit law enforcement agencies to serve as debt collectors or arbiters of private commercial disputes.[6]
The consequences of this overreach are significant. For individuals and businesses, criminal investigations and prosecutions often inflict severe reputational, financial, and psychological harm that far exceeds the nature of the underlying dispute. For the digital asset sector, the threat of criminal intervention in failed investments or commercial ventures creates uncertainty, discourages innovation, and weakens investor confidence in an emerging industry. It also places an unnecessary burden on the criminal justice system by diverting investigative and prosecutorial resources away from genuine economic and financial crimes. Unless regulators, law enforcement agencies, and courts maintain a clear distinction between civil liability and criminal culpability, the misuse of criminal process will continue to undermine both the development of Nigeria’s digital economy and the integrity of its criminal justice system.
The Civil Law Alternative: Adequate and Appropriate Remedies
Nigerian civil law provides a comprehensive framework for resolving digital asset disputes that do not meet the threshold for criminal liability. Rather than resorting to criminal investigations and prosecutions, aggrieved parties can pursue a range of civil remedies tailored to the nature of the dispute and the relief sought.
Where a digital asset transaction is governed by a smart contract, terms of service, or a written agreement, a party may institute an action for breach of contract to recover losses arising from non-performance. Similarly, where one party induces another to enter into a transaction by making false representations, the injured party may bring a civil claim for deceit or fraudulent misrepresentation. These causes of action enable the courts to award damages and other appropriate remedies without invoking the criminal process.
The law also recognises restitutionary claims based on unjust enrichment. Such claims arise when one party has obtained a benefit at the expense of another without a legal basis to retain it. In appropriate cases, the courts may order restitution to prevent an inequitable outcome. In addition, Nigerian courts possess broad equitable powers to grant injunctive relief, including freezing and preservation orders designed to prevent the dissipation of assets pending the determination of a dispute. Recent fintech-related applications demonstrate an increasing judicial willingness to extend these remedies to disputes involving digital assets and emerging financial technologies.
Beyond judicial remedies, parties may also seek redress through regulatory mechanisms. The SEC and the CBN maintain supervisory and dispute-resolution frameworks within their respective regulatory spheres. Depending on the nature of the transaction, affected investors may utilise these mechanisms to address grievances involving regulated digital asset activities, securities offerings, or financial service providers.
The legal framework governing capital market disputes further strengthens the case for civil resolution. By virtue of section 251(1)(e) of the Constitution of the Federal Republic of Nigeria 1999 (as amended), the Federal High Court exercises exclusive jurisdiction over matters relating to the operation of the Companies and Allied Matters Act, the Investments and Securities Act, and other capital market issues. This jurisdiction, coupled with the SEC’s expanded oversight of digital assets under its 2024 Rules, provides a specialised and effective forum for resolving token investment-related disputes.
The Court of Appeal reinforced this position in City Securities Ltd v. Osom & Ors, where it recognised the Federal High Court and the Investment and Securities Tribunal as specialised forums for the resolution of securities-related disputes. Given the increasing regulatory integration of digital assets into Nigeria’s securities framework, there is little justification for channelling disputes within this regulatory perimeter into the criminal justice system. Civil and regulatory mechanisms offer more appropriate, proportionate, and legally coherent avenues for resolving such disputes while preserving the distinction between commercial liability and criminal wrongdoing.[7]
Judicial and Regulatory Developments
Nigerian courts have begun to resist the growing tendency to criminalise digital asset disputes without a proper assessment of their underlying nature. A notable example emerged in December 2024 when Justice Emeka Nwite of the Federal High Court, Abuja, discharged a preservatory order previously obtained by the EFCC over six bank accounts suspected of facilitating unlawful cryptocurrency transactions. The Court acted on an affidavit filed by the EFCC, in which the Commission acknowledged that its investigations had revealed no link between the funds in the affected accounts—amounting to over ₦89,000,000—and any unlawful activity. This decision is significant for two reasons. First, it demonstrates the willingness of Nigerian courts to lift restrictive orders where subsequent investigations fail to substantiate allegations of criminal conduct. Secondly, it reinforces the constitutional protection of property rights under section 44 of the Constitution of the Federal Republic of Nigeria 1999 (as amended), which prohibits the arbitrary deprivation or continued retention of property in the absence of lawful justification.[8]
Although no Nigerian appellate court has yet squarely addressed the distinction between commercial failure and criminal fraud within the digital asset sector, established principles of criminal law provide a clear framework for analysis. Cryptocurrency trading is inherently speculative, and market volatility constitutes a widely recognised commercial risk. Consequently, a peer-to-peer trader who fails to deliver digital assets at a previously agreed price due to sudden and adverse market fluctuations does not, without more, satisfy the mens rea required for fraud. Criminal liability cannot arise merely because a transaction becomes commercially disadvantageous or unprofitable. Rather, the prosecution must establish dishonest intent at the time of the transaction. As digital asset litigation continues to develop, Nigerian courts will likely be called upon to apply this principle expressly and consistently.
Regulatory developments also reflect a growing preference for civil and administrative resolution mechanisms. The SEC 2024 Digital Assets Rules introduced a dispute-resolution framework through which disputes between investors and registered VASPs may be referred to the Commission’s Administrative Proceedings Committee before resorting to litigation. This framework reflects a deliberate regulatory policy aimed at de-escalating disputes and encouraging specialised resolution processes rather than immediate recourse to criminal enforcement.[9]
Developments in other jurisdictions support this approach. In the United Kingdom, regulators and courts generally treat failed cryptocurrency investments as civil or regulatory matters, reserving criminal sanctions for conduct involving deliberate fraud, such as Ponzi schemes, exit scams, and market manipulation. Similarly, the United States has adopted a layered enforcement model that distinguishes between civil regulatory actions and criminal prosecutions. Under this framework, regulatory agencies address compliance failures and investor protection concerns through administrative and civil proceedings. At the same time, criminal referrals are reserved for cases involving clear evidence of scienter, intentional deception, or other forms of fraudulent conduct. These comparative approaches underscore an emerging international consensus that not every failed digital asset transaction warrants criminal justice intervention. Rather, criminal law should remain a remedy of last resort, confined to cases involving genuine criminal intent and demonstrable wrongdoing.
Challenges and Systemic Implications
The persistent misapplication of criminal law to digital asset disputes in Nigeria reveals deeper structural deficiencies within the legal and regulatory framework. One of the most significant challenges is the limited technical understanding of digital assets among law enforcement officers, prosecutors, and, in some cases, judicial officers. Digital asset transactions often involve complex technologies, including blockchain networks, smart contracts, decentralised finance protocols, and automated trading systems. Without sufficient technical literacy, investigators may struggle to distinguish between a coding error, a market-driven loss, a failed investment, and a deliberate fraud scheme. As a result, transactions that merely produce financial losses are frequently misconstrued as criminal conduct.
A second challenge is the absence of a specialised adjudicatory mechanism dedicated to digital asset disputes. Although existing courts and regulatory bodies have jurisdiction over many aspects of digital asset transactions, parties with legitimate civil grievances often face lengthy, expensive litigation. This reality encourages aggrieved investors to seek recourse through law enforcement agencies, whose investigative powers, asset-freezing mechanisms, and coercive processes appear to offer a faster route to recovery. However, the convenience of criminal enforcement cannot justify its use as a substitute for appropriate civil remedies.
The operation of the Administration of Criminal Justice Act 2015 further compounds the problem. Even where a criminal complaint ultimately proves unfounded, an accused person may still face arrest, detention, asset restrictions, reputational damage, and prolonged pre-trial proceedings.[10] In practice, some complainants exploit this coercive framework as a negotiating tool, using the threat of criminal prosecution to compel settlements in disputes that are fundamentally commercial in nature. Such misuse undermines the integrity of the criminal justice system and reduces criminal process to an instrument of debt recovery.[11]
The Supreme Court strongly condemned this practice in Aviomoh v. Commissioner of Police & Anor, where it criticised the growing tendency to convert purely civil disputes into criminal proceedings. The Court observed that litigants increasingly resort to criminal complaints because civil remedies are often perceived as slow and inadequate. It warned that using criminal prosecution to exert pressure in disputes that do not involve criminal conduct is oppressive, vexatious, and inconsistent with the rule of law. The Court further emphasised that parties who knowingly invoke criminal processes in matters that properly belong within the civil jurisdiction should be held accountable for initiating misconceived proceedings.
The implications of this practice extend beyond individual disputes. The misuse of criminal law erodes public confidence in law enforcement institutions, burdens the criminal justice system with matters better suited for civil adjudication, and creates uncertainty within the digital asset ecosystem. More importantly, it threatens constitutional guarantees of personal liberty, fair hearing, and property rights by exposing individuals to the coercive machinery of the State in circumstances where no genuine criminal conduct exists. As Nigeria’s digital economy continues to expand, addressing these systemic deficiencies will be essential to ensuring both investor protection and the proper administration of justice.
Recommendations And Safeguards
Addressing the misuse of criminal law in digital asset disputes requires a coordinated legislative, regulatory, and institutional response. Clear legal standards, specialised dispute-resolution mechanisms, and greater technical capacity within the justice sector are essential to preserving the distinction between civil liability and criminal culpability while ensuring adequate protection for investors.
First, the National Assembly should enact comprehensive legislation specifically regulating digital assets. Such legislation should clearly delineate the boundaries between regulatory breaches, civil wrongs, and criminal offences within the digital asset ecosystem. It should also establish that investment losses, contractual failures, and other commercial disputes are ordinarily matters for civil or administrative resolution, while reserving criminal sanctions for conduct involving intentional deception, fraud, or other demonstrably dishonest acts.
Secondly, the EFCC and the Attorney General of the Federation should develop prosecutorial guidelines tailored to digital asset transactions. These guidelines should set the evidential threshold for commencing criminal investigations or prosecutions and mandate a preliminary assessment of whether a complaint discloses a genuine criminal offence or merely a civil dispute. Such safeguards would reduce the risk of arbitrary arrests and prevent the misuse of criminal process for debt recovery or commercial leverage.
Thirdly, the SEC, in collaboration with the Federal Ministry of Justice, should establish a specialised framework for resolving digital asset disputes. Whether constituted as a dedicated tribunal, an administrative panel, or a specialised division within an existing adjudicatory structure, such a body should possess the authority to award restitution, order disgorgement of improperly obtained gains, impose administrative sanctions, and facilitate efficient dispute resolution. This would provide investors with a swift and effective avenue for redress while reducing unnecessary reliance on criminal enforcement mechanisms.
Judicial capacity-building must also form a central part of any reform agenda. The National Judicial Institute should incorporate digital assets, blockchain technology, smart contracts, and related emerging technologies into its continuing judicial education programmes. Enhanced technical literacy would better equip judges and magistrates to distinguish between market losses, contractual breaches, technological failures, and genuine fraudulent schemes, thereby promoting more consistent and informed decision-making.
Finally, regulators should intensify public education and investor-awareness initiatives. The SEC and the CBN should continue to educate the public on the risks associated with digital asset investments, the nature of market volatility, and the legal remedies available to aggrieved investors. Such initiatives should emphasise that not every investment loss constitutes fraud and should encourage the use of civil and regulatory channels as the primary means of resolving disputes. Improved public understanding would help reduce the tendency to resort to criminal processes for matters more appropriately addressed by contractual, regulatory, or civil law mechanisms.
Collectively, these measures would strengthen investor protection, enhance regulatory certainty, promote innovation within Nigeria’s digital economy, and preserve the fundamental principle that criminal law should be reserved for genuinely culpable conduct rather than ordinary commercial failure.
Conclusion
The emergence of digital assets has exposed important gaps within Nigeria’s legal and regulatory framework. While the growth of cryptocurrencies, tokens, and other blockchain-based assets has created new opportunities for investment and innovation, it has also generated disputes that are too often mischaracterised as criminal conduct. The tendency to invoke criminal law in matters that are fundamentally contractual, commercial, or investment-related undermines the essential distinction between civil liability and criminal culpability. It distorts the concept of mens rea, discourages legitimate innovation, and places unnecessary strain on the criminal justice system.
A principled response requires adherence to a simple but fundamental rule: criminal prosecution should be reserved for cases involving deliberate deception, dishonest intent, and provable fraud. Where disputes arise from investment losses, market volatility, contractual breaches, or business failures, civil and regulatory mechanisms provide more appropriate and effective remedies. Achieving this balance will require legislative reform, clearer prosecutorial standards, enhanced judicial capacity, and stronger regulatory oversight. Ultimately, preserving the integrity of both the digital asset ecosystem and the criminal justice system depends on recognising a fundamental legal truth: not every loss is a crime.
Reference:
- See Cybercrimes (Prohibition, Prevention, Etc.) Act 2015; EFCC (Establishment) Act 2004; Advance Fee Fraud and Other Related Offences Act 2006. For the SEC’s 2024 Digital Asset Rules see Securities and Exchange Commission Nigeria, “New Rules on Issuance, Offering Platforms and Custody of Digital Assets,” 2024 ↑
- (2022) LPELR-57088(CA) ↑
- Abacha v. The State [2002] 11 NWLR (Pt. 779) 437 ↑
- (2025) LPELR-82509(CA) ↑
- UBA Plc v. Jargaba [2007] 11 NWLR (Pt. 1045) 247 ↑
- EFCC v. Ekeocha [2021] LPELR-55348(CA) ↑
- Oando Plc v. SEC [2014] 14 NWLR (Pt. 1426) 1 ↑
- See Federal High Court, Abuja (Justice Emeka Nwite), ruling on the EFCC’s application to lift preservatory order over six bank accounts; EFCC Affidavit filed 25 November 2024 acknowledging absence of unlawful activity; see also reporting at Lawyard.org, “Court Orders Release of N89m Linked to Alleged Cryptocurrency Transactions,” 2 December 2024. See Constitution of the Federal Republic of Nigeria 1999 (as amended), s. 44. ↑
- Securities and Exchange Commission, Rules on Digital Assets 2024; SEC Administrative Proceedings Rules 2013 (as applicable to VASPs). ↑
- Administration of Criminal Justice Act 2015, ss. 27–36 (bail provisions). ↑
- SUNDAY v. FRN (2025) LPELR-80803(CA) ↑
