FlexPay founders arrested over alleged KES 31.2 million theft and Fraud

Kenyan police have arrested the two founders of FlexPay, Martin Kariuki Maina and Johnson Gituma Mwangi, over the alleged theft of KES 31.2 million ($242,345) belonging to a retailer. The arrests deepen scrutiny of a startup that has spent months facing customer complaints about delayed refunds and withdrawals.

Detectives from the Directorate of Criminal Investigations picked up Maina and Mwangi in Roysambu, Nairobi, on Wednesday. The DCI said the pair had been acting as agents for the retailer, collecting payments from customers who bought goods and picked them up at the retailer's branches. That money was meant to flow back to the retailer.

"The funds had been entrusted to the suspects for onward remittance to the retailer," the DCI said, adding that detectives established the two allegedly diverted the money for personal use, working with other suspects who remain at large.

Maina and Mwangi are due to be arraigned at the Milimani Law Courts, charged with stealing by agent under Section 283(b) of Kenya's Penal Code. The DCI has not named the retailer or explained how the diversion allegedly happened, and the investigation continues.

The arrests land at a difficult moment for FlexPay. Founded in 2017, the startup built a "save now, buy later" model that lets customers reserve goods from partner merchants and pay in instalments before collecting them, alongside goal-based and group savings products. As of September 2023, its most recent public figures, FlexPay had more than 600 merchant partners and over 200,000 customers, and had raised $785,000 from investors including Acacia Group, LoftyInc, Expert Dojo, Google Black Founders Fund and Renew Capital. Mwangi was named the company's co-founder and COO at the time.

For months before the arrests, FlexPay customers had been complaining on Google Play about slow withdrawals and unresponsive support, including users still waiting on refunds weeks after requesting them. The DCI says its investigation concerns funds collected on the retailer's behalf, not the customer withdrawal complaints, and has not said whether the two issues are connected.

With Maina and Mwangi in custody and other suspects still being pursued, the case now moves to Kenya's courts, where the allegations against the founders will be tested.