High Court Rejects Request to Reverse Billions Lost by Flutterwave in PoS Fraud**

**High Court Rejects Request to Reverse Billions Lost by Flutterwave in PoS Fraud**

On Wednesday, August 14, 2024, a Federal High Court in Abuja declined a motion by the Inspector General of Police (IGP) seeking to compel around 12 banks and financial institutions to return billions of naira that were allegedly fraudulently withdrawn from a Flutterwave account at Wema Bank.

The fraudulent withdrawals reportedly occurred due to a system malfunction between October 12 and 13, 2023.

The motion ex parte, filed on July 17, 2024, under the case number FHC/ABJ/CS/1015/24, claimed that approximately 244 individuals (defendants) had illegally siphoned billions of naira from Flutterwave’s account. The funds were transferred to numerous bank accounts owned by individuals who are either difficult to trace or completely untraceable.

The court refused to grant the ex parte motion, emphasizing the importance of hearing from the banks involved and pointing out that the applicant had not submitted a motion on notice as required.

Earlier in the year, Tech Cabal reported that Flutterwave had allegedly lost N11 billion due to the security breach, according to sources familiar with the incident. However, the company later indicated that the breach was ultimately unsuccessful.

Flutterwave confirmed that the incident took place in April, when it noticed unusual activity on one of its platforms, which is used by a small group of customers for specific transactions. The company promptly notified law enforcement and provided them with the IP addresses and details of the offenders. Flutterwave also stated in a communication to Nairametrics that it successfully thwarted the attempted breach and reported the culprits to the authorities.

Despite these efforts, court documents later revealed that Flutterwave sought police assistance to recover the stolen funds. Preliminary police investigations indicated that fraudulent transactions had been conducted using Flutterwave PoS terminals on October 12 and 13, 2023.

Flutterwave requested Wema Bank to freeze its settlement account, from which significant sums had been transferred to various individual accounts.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) showed that 9,633 erroneous transactions were carried out on Flutterwave's PoS platform on October 12 and 13, 2023, involving 814 Flutterwave PoS agents during the system glitch. NIBSS estimated Flutterwave's total exposure at the time to be N21.2 billion. However, the company worked with banks to restrict affected accounts, successfully preserving N7.2 billion.

The IGP noted that some suspected PoS agents involved in the fraudulent activities had been arrested.

During the court proceedings, the IGP’s counsel, Victor Okoye, urged Justice Peter Lifu to grant the ex parte motion and order the reversal of the funds to Flutterwave. However, the judge questioned why the motion should be granted without hearing from the banks, emphasizing the constitutional right to a fair hearing.

"Should I order them [the banks] to reverse the funds without hearing their side of the story, based on your one-sided account?" the judge asked.

He further stated, "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," underscoring the need for a fair hearing, especially from the banks.

Okoye argued that the defendants were untraceable and could approach the court at any time. However, the judge countered that the banks should have been served with the legal processes so they could respond, as they are the entities responsible for reversing the funds.

The judge also noted that the ex parte motion was not accompanied by a motion on notice, as required by the court's rules.

"Who is to reverse it if not the banks? Serve them and let them come and tell me, ‘We surrender, we have no objection, and we are ready to comply with the court order,’" the judge stated.

The judge subsequently refused the ex parte motion, describing it as a violation of Section 36 of the 1999 Constitution, which guarantees the right to a fair hearing.

**Lawyers’ Perspectives**

In an interview with Nairametrics, Barrister Michael Okejimi explained that while the law allows a judge to decide whether to hear the other party before granting an ex parte motion, the principle of fair hearing is fundamental.

"Ordinarily, no party deserves to be unheard in a matter," he said.

He added that while the right to be heard is enshrined in Section 36 of the 1999 Constitution, there are exceptional cases where notifying the other party could cause irreparable harm. He noted that the correct legal procedure typically involves filing a suit, followed by motions on notice and ex parte for interim orders.

Barrister Opeyemi Owolabi echoed a similar sentiment, telling Nairametrics that when an ex parte application is submitted without a motion on notice or interlocutory injunction, it suggests that the court is considering the prayers at a preliminary stage.

He explained that the purpose of an ex parte motion is often to allow security agencies or an applicant to investigate an account before funds are withdrawn, as such withdrawals could hinder further investigation. He emphasized that the grounds of motion on notice and fair hearing are valid reasons to refuse an ex parte motion.

Owolabi concluded that without an interlocutory injunction or motion on notice, the ex parte motion is essentially incompetent.

**Fraud Incidents in Fintech and Banks**

Flutterwave is not the only company to experience significant fraud incidents. For instance, in 2022, MTN, Africa's largest mobile network operator, reported a loss of N10.5 billion due to cybercriminals. Similarly, the Fraud and Forgeries report released by the Financial Institutions Training Centre (FITC) revealed that Nigerian banks lost a total of N2.09 billion to fraud in Q4 2023, with mobile channels emerging as the primary method through which the largest amounts were stolen.*