Nigerian fintech Marasoft Pay has found itself at the center of a fraud controversy after paying its employees from a suspected fraudulent source, resulting in the freezing of their accounts and a legal battle to unfreeze the funds. The company, founded by Emmanuel Marakwe-Ogu, operates in Kenya and Nigeria, allowing businesses and individuals to collect payments via its platform.

The trouble began on October 16, 2024, when a glitch allowed Marasoft's wallet access to more funds than it had, enabling the company to withdraw over ₦84 million ($54,000). CEO Marakwe-Ogu initiated 102 withdrawals from the account within 12 hours, each linked to his phone number and bank verification number (BVN). The timing of the glitch was fortuitous for Marakwe-Ogu, as it came a week after employees stopped working due to growing frustration over unpaid salaries.

Between October 16 and 17, Marakwe-Ogu paid ₦35 million in overdue salaries directly from the Flutterwave wallet. However, employees were right to be worried, as days after receiving salary payments, their accounts were frozen, and over 40 workers began a legal battle to unfreeze their funds. According to an email from a senior customer experience associate at Flutterwave, the funds deposited into employees' accounts had been traced to a fraudulent merchant, and investigations were ongoing.

After paying employees from the Flutterwave wallet, Marakwe-Ogu transferred ₦49 million to various accounts through payment processors like Transact Pay, a European fintech that generates virtual accounts, to a VFD Bank account he controlled, complicating retrieval efforts. A week later, TransactPay sent a recall request for ten transactions worth ₦19.3 million, copying former Marasoft employees. By then, the accounts of several Marasoft employees were frozen, and many were left scrambling for answers.

While Marakwe-Ogu continued to tell employees that the restrictions were a mistake and would be lifted, he agreed to a five-month repayment plan with Flutterwave expiring in February 2025, according to a former employee with direct knowledge of the matter. Flutterwave declined to comment on the repayment plan, citing confidentiality reasons.

The fallout from the incident has been painful. One employee, whose account was blocked, was forced to borrow money from her father to refund her co-contributors in an esusu after her funds were frozen. "I was left in a very difficult situation. It was stressful for both my father and me," she told TechCabal, asking not to be named so she could speak freely.

Marasoft resumed operations in January, and at least eight employees have returned to the fintech despite the frozen accounts and owed salaries. However, the incident has raised serious questions about the company's operations and its ability to safeguard employee funds. Marakwe-Ogu did not respond to requests for comments.

The incident highlights the risks associated with fintechs operating without local licenses, as Marasoft Pay does not hold a license in Kenya. Instead, it processes transactions through a Flutterwave wallet, which it has used since 2022. Kenyan court documents showed that Marasoft was one of the fintechs that deposited over $55 million into Flutterwave in 2022. Flutterwave clarified that Marasoft Pay is not a partner but a customer, and smaller fintechs typically process payments through licensed fintechs, as banks do not onboard unlicensed fintechs.

The controversy surrounding Marasoft Pay serves as a reminder of the importance of regulatory oversight and due diligence in the fintech industry. As the sector continues to grow, it is essential that companies prioritize transparency, accountability, and the protection of user funds to maintain trust and credibility.