Safaricom, Vodafone Group, and other companies, as well as two government agencies, are being sued by three Kenyan M-PESA users about their Fuliza overdraft service (which is run by Safaricom, NCBA, and KCB).
The plaintiffs claim that the service is illegally using money that belongs to non-borrowing M-PESA users and engaging in financial business without being a bank or financial institution under the Banking Act.
The case has been brought forth by Gichuki Waigwa, Lucy Nzola, and Godfrey Okutoyi, who are now seeking KES 305 billion in damages for fraudulent misrepresentation, material non-disclosure of facts, illegal investment of M-PESA account holders’ funds, predatory lending practices, and charging exorbitant interest rates.
As said, the defendants include Safaricom, Vodafone Group, the Central Bank of Kenya, and the Communications Authority of Kenya.
The case centres around the introduction and management of M-PESA money transfer services in Kenya.
The plaintiffs allege that the government officials involved in the project engaged in fraudulent activities to benefit themselves and their associates at the expense of Kenyan citizens.
Specifically, they claim that the government officials misrepresented facts about M-PESA’s ownership structure and failed to disclose important information about its operations.
We have since looked into the printout of the suit, which has excerpts from a statement by the Ministry of Finance regarding M-PESA money transfer services.
The statements suggest that there were concerns about transparency and accountability in the project.
Also, it would appear like the statement acknowledges that there were reporting and public disclosure requirements for M-PESA, but it is unclear whether these requirements were met.
Furthermore, the suit provides information about reporting and public disclosure requirements.
It notes that companies are required to report certain information to regulatory authorities and make public disclosures about their operations.
It is revealed that these requirements are intended to promote transparency and accountability in business practices.
The plaintiffs further allege that Safaricom and the other defendants were involved in a scheme to defraud them of their entitlements as beneficiaries of a trust established by Safaricom in 2007.
The trust was set up to hold electronic money deposited by Safaricom’s mobile money service, M-PESA.
According to the plaintiffs, they were entitled to a share of the funds held in the trust but were denied access to their entitlements due to fraudulent activities by the defendants.
The plaintiffs allege that the defendants engaged in a well-choreographed state-sanctioned patronage scheme to deny them their rightful share of the trust funds.
The case raises important questions about transparency and accountability in financial systems.
Mobile money services like M-PESA have become increasingly popular in developing countries as a way for people without access to traditional banking services to store and transfer money electronically.
However, as this case shows, there are risks associated with these systems if they are not properly regulated and monitored.
One issue raised by this case is whether electronic money stored on SIM cards should be considered real money or simply an electronic representation of value.
If it is considered real money, then it should be subject to the same regulations and protections as traditional bank deposits.
If it is not considered real money, then there may be loopholes that can be exploited by unscrupulous actors.
Another issue raised by this case is whether trusts established by private companies should be subject to greater scrutiny and regulation.
In this case, it appears that Safaricom established a trust without proper oversight or transparency, which allowed for fraudulent activities to take place.
The plaintiffs allege that Safaricom and the other defendants engaged in corrupt practices related to a tender for a government project.
They claim that the defendants colluded to manipulate the tender process in their favour, resulting in a breach of procurement laws and regulations.
The plaintiffs also allege that some of the defendants received kickbacks from Safaricom in exchange for their assistance in securing the tender.
The suit seeks various reliefs including declarations that Safaricom acted unlawfully by manipulating the tender process, so it wants Safaricom to pay damages for breach of contract. It also wants all defendants to pay damages for conspiracy to defraud. The suit further wants the defendants to pay exemplary damages and interest on damages awarded, and costs incurred by plaintiffs in pursuing this suit or any other relief deemed fit by the court.
The case has been assigned to Anti-Corruption & Economic Crimes Division at Milimani Law Courts in Nairobi.
The plaintiffs have filed several pleadings outlining their arguments against Safaricom and other defendants.
They have also requested an expedited hearing due to public interest in this matter.
We will update this story once Safaricom responds to this suit.