Editor's note: An original headline of this article read, "Fact-checking 2 major allegations against Olugbenga Agboola". This misrepresented the purpose of the article, which genuinely set out to provide an objective account. The headline has now been updated.
In the past 48 hours, social media has been set ablaze as allegations of fraud, insider trading, sexual harassment, and several other things have been made against Olugbenga “GB” Agboola, the CEO and founder of one of Africa's unicorns, Flutterwave.
On Tuesday, April 12, 2022, investigative/freelance Journalist, David Hundeyin published the latest edition of his newsletter, the West Africa Weekly. In it, using screenshots of emails, Slack messages, WhatsApp correspondence, and official-looking documents, he weaves a story that has raised more questions than it has answered.
Does an employee selling stock options by force constitute insider trading?
According to Hundeyin, employees were forced to sell their stock options to an investment vehicle said to be owned by Olugbenga Agboola.
Hundeyin’s report claims they sold for lower than market price, as determined by Agboola, and tags this as insider trading.
But before we go into that, how do employee stock options work?
How do employee stock options work?
An employee stock option (ESO) is compensation given by a company to the employee. This gives them potential access to shares in the company at a preset price. However, before they can access said shares, the stock must have been vested.
In plain speak, vesting means you can now exercise or buy the company’s shares. It happens gradually, so if the contract says that the vesting period is four years, you cannot fully access your stock option until four years after the agreement.
In some cases, you can access the part that has vested. Let's use an example. Chike owns ESO in XYZ company. According to the contract, he must have stayed with the company for four years before exercising his option. In the first year, he can access 25% of the stock. If he chooses not to, in the second year, he can access half of the ESO, and it goes on and on till the fourth year, when he can then access 100%.
ESOs only become valuable if the company’s stock price rises above the preset price in the agreement. So if Chike was told that the price he can buy the stock is when it rises to $3, if it rises to $4, he can buy it for cheap at $3.
Employees usually wait till liquidity events like an Initial Public Offer (IPO) or a merger or find someone willing to buy their stock option if they are impatient.
So, was there insider trading?
From a screenshot dated February 28, 2021, that Hundeyin shared, this employee appears to have exercised his option to buy but then wanted to sell those shares. They are offered an option to sell at $3.4999, which they round off to $3.5 and accept.
Also embedded in the article is a blurry video said to be from a potential Flutterwave investor explaining how he arrived at a possible share market price. At Series D, shares would be valued at $52. At Series C, $20.25, Series B, $4.47.
What SEC filings show
According to EDGAR (a US Securities and Exchange Commission company search platform) filings, the date of first sale — when Flutterwave first began receiving money — for the Series C was February 2021, two days before the sale by the employee. The final filling was made on March 12, 2021.
So let’s piece all of this together. Flutterwave begins raising Series C in February. Employee sells in February at $3.5 lower than the potential $20. Flutterwave completes raising Series C round in March 2021.
Next question: who bought those shares?
Hundeyin says it was Agboola, but the above screenshot shows the employee conversing with Kayinsola Adepoju, Flutterwave's Investor Relations Manager.
Sources close to the matter revealed to Techpoint Africa that the stock was bought by existing shareholders, who were exercising their first right of refusal, and not Agboola.
Can this be classified as insider trading according to the US Securities and Exchange Commission (SEC) Rules?
Side note: Flutterwave is a company incorporated in Delaware in the US and, as such, is governed by US laws and regulations.
According to SEC Rule 10b-5, which provides for insider trading, it is illegal for anyone to defraud or deceive someone, including misrepresenting material information concerning the sale or purchase of a security.
Essentially, the company’s officers, directors, or insider employees should not withhold any material information that could reasonably affect the share price or affect the judgment of the person planning to buy or sell stock.
Does insider trading apply to private companies?
A 2011 case, SEC v Stiefel Laboratories Inc, appears to answer this question.
In 2009, Stiefel, a family-owned private company, was sold to GlaxoSmithKline. However, before the sale, the company defrauded shareholders of $110 million by withholding material information about the valuation of the shares held by Stiefel employees and the sale of the company.
This enabled the company to buy back these shares at an artificially low price and was found to have violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
What then is true?
Fact 1: Insider trading is illegal when material information that could affect the sale of a security or the buyer's or seller's judgment is withheld.
Fact 2: Flutterwave as a private company can be investigated by the SEC for insider trading, following the Stiefel case.
Fact 3: Flutterwave began raising its Series C and filed its first sale on February 26, 2021, two days before the employee sold their shares at $3.5.
Fact 4: Flutterwave closed Series C and filed with SEC on March 12, 2021, and share prices supposedly increased.
What is still debatable, however, is if the shares were sold to Agboola or the investors and if there was any coercion. Does this count as insider trading?
Verdict? The timing between the date of filing the first raise, the date the employee agreed to sell his shares, and the date Flutterwave told SEC it had finished raising is certainly damning.
However, without access to more information like internal memos between the employee and Flutterwave, emails, and messages — like SEC would have legal right to — we can't say beyond doubt that there was insider trading. This would have to be properly investigated.
There’s still a bit more to unpack from Hundeyin’s article, and it has to do with Agboola’s time at Access Bank
Was Access Bank aware of any of this?
Going by Agboola’s LinkedIn profile, he worked at Access Bank from November 2014 to May 2016. It also says he founded Flutterwave in May 2016 and assumed his CEO role in 2018.
Hundeyin, however, says that Agboola didn’t resign from his job at Access as Head, Digital Factory and Innovation until 2018. Not only did he not resign, but he did not tell his superiors at Access Bank of this fact while making use of company resources to build Flutterwave.
In an interview with Big Tech This Week published on April 3, 2022, Agboola does not mention the date he resigned at Access Bank but says he had begun working on Flutterwave at a co-working space. He then brought in Adekoya and Iyin Aboyeji, former CEO and Co-founder at Flutterwave.
Interestingly, Agboola claims Aboyeji had left Andela. However, according to Aboyeji in this tweet made on April 13, 2022, he was still at Andela until May 2016, when Flutterwave was incorporated “by his hand.”
In his article, Hundeyin alleges that in early 2018, Agboola, Aboyeji, and Herbert Wigwe — Access Bank CEO — traveled to the US for a SEC hearing and testified under oath that Agboola never worked simultaneously at Flutterwave and Access Bank.
Why would Wigwe travel to the US with Agboola and Aboyeji?
Aboyeji, in another tweet on April 13, 2022, admits that he did indeed go to the US for a SEC hearing, but he went alone.
In a second tweet, he mentions that the hearing was concluded in 2017 and not 2018, as Hundeyin claims.
Conversely, according to the interview with Big Tech This Week, Agboola claims that he flew to the US with Wigwe when they were trying to acquire Uber as a client. Although he doesn't mention a specific date, Uber became a Flutterwave client in 2016.
But there's another tangent here that involves Flutterwave and some money allegedly owed to Access Bank
Why does Access Bank send that letter?
Hundeyin’s article includes a letter dated August 30, 2018, in which Access Bank claims that Flutterwave owes the bank ₦221,106,830.80 (~ $530,000).
According to Hundeyin's source named ‘Ose’, in the third quarter of 2018, while conducting an audit for the Access-Diamond merger, Access Bank discovered that Flutterwave had been settled for transactions but wasn't giving the bank its share.
Apparently, this was an arrangement between Flutterwave and Access Bank, which Agboola describes as their "first acquiring bank." He also mentions Wigwe's role in helping to onboard potential clients who would then domicile their traditional businesses with the bank.
Side note: An acquiring bank enables a merchant to accept digital payments.
Coincidentally, Aboyeji stepped down two months after Access Bank sent the letter.
What are the facts?
Fact 1: Agboola worked at Access Bank.
Fact 2: Wigwe travelled with Agboola to San Francisco for several meetings.
Fact 3: Aboyeji says there was an SEC hearing that only he travelled for.
Fact 4: Flutterwave and Access Bank had a partnership that meant transactions would pass through the bank.
Fact 5: Wigwe knew that Agboola was at Flutterwave.
Fact 6: There was a Flutterwave-related SEC hearing
Who then is lying? Why was there a SEC hearing? Does Wigwe knowing mean that Access Bank's board knew?
Verdict? From the facts we have, Wigwe definitely travelled to the US for something Flutterwave-related. Whether it was for a SEC hearing, to help acquire clients, or both still remains to be seen. It is also not clear if he knew or was working based off the Agboola-as-an-advisor story. However, the letter from Access Bank to Flutterwave seems to suggest that either only Wigwe, but not the bank's management, knew or there a dispute on the initial agreement.
Like we said at the beginning (Verdict 1 included), several questions still remain unanswered, but while we await an official statement from all parties involved, we can draw conjecture based off the facts that we have verified.
[UPDATE]: On Thursday, April 13, 2022, at 1:13 p.m. (WAT), Hundeyin shared a screenshot of an email sent by Adepoju, Flutterwave's Investor Relation Manager to another employee about an opportunity to participate in a Flutterwave Secondary Process at a $3.4999 share price on March 1, 2021.
This introduces a new and damning fact suggesting that Flutterwave was reaching out to employees to sell their shares at a lower rate while raising money for a Series C that would cause an increase in the company's share price.
This is a developing story