FlexPay sues Naivas and DCI over KES 31.2 million dispute that led to founders' arrests

Kenyan fintech FlexPay has sued Naivas Supermarket, the Directorate of Criminal Investigations (DCI) and the Office of the Director of Public Prosecutions (ODPP), accusing the retailer of using police to recover KES 31.2 million that the two companies had been disputing for months. The lawsuit follows the September arrests of FlexPay directors Martin Kariuki Maina and Johnson Gituma Mwangi, whom detectives accused of diverting money collected from customers on behalf of a retail chain.

As TechRift reported on September 3, the DCI alleged that the two directors had stolen KES 31,213,700.95 entrusted to them for remittance to the retailer. The agency did not identify the business involved or explain how the money was allegedly diverted. However, an investigation published by TechCabal on October 5 has established that Naivas was the retailer, with contracts, demand letters and correspondence with prosecutors showing that the companies had disagreed over the same amount since March 2026. FlexPay maintains that Naivas owed it money and that their accounts had never been fully reconciled before police intervened.

How FlexPay's partnership with Naivas fell apart

FlexPay began working with Naivas in February 2021, offering customers a way to reserve products at the supermarket and pay for them in instalments before collecting them. Under their agreement, FlexPay would receive the payments and transfer the money to Naivas by the close of the following day once the customer collected their goods, retaining a 5% commission. The arrangement was supposed to run until February 2028, and according to FlexPay's submissions to prosecutors, its platform processed more than KES 3 billion in transactions for Naivas over five years.

Problems emerged towards the end of 2025 when, according to FlexPay, Naivas sought to reduce the commission from 5% to between 0.5% and 1%. The fintech proposed a compromise of 3%, but the companies failed to agree. Their relationship deteriorated further in March 2026, when Naivas began demanding payment for money it said FlexPay had collected from shoppers without remitting to the supermarket. Naivas's lawyers calculated that FlexPay had generated KES 49.8 million in sales in February but transferred only KES 26.3 million.

The amount demanded increased over the following two weeks. Naivas initially sought KES 29.57 million in early March, raised the figure to KES 30.21 million on March 16, and eventually demanded KES 31.21 million in a termination notice issued the following day. By then, the supermarket had already suspended the partnership. An internal memo dated March 6 instructed branch managers to stop accepting FlexPay transactions, remove its promotional materials and prevent its representatives from operating inside Naivas stores beginning March 7. Products previously reserved under the arrangement were also to be returned to ordinary inventory.

The March 17 termination notice gave FlexPay 30 days, even though Naivas branches had already been instructed to stop using the platform. That notice demanded KES 31,213,700.95, exactly the amount police would later accuse FlexPay's directors of stealing.

Why FlexPay disputes the KES 31.2 million

FlexPay's response is that Naivas calculated what it was owed without accounting for outstanding obligations under their agreement. One concerns loyalty rewards introduced in December 2023, when the companies amended their contract to allow customers shopping through FlexPay to earn Naivas loyalty points. FlexPay says it paid for those points in advance, expecting reimbursement from the supermarket. By March 2026, its internal audit showed that Naivas allegedly owed it more than KES 24 million in unpaid reimbursements. That amount has not been independently verified.

The disagreement also involves transactions that FlexPay claims were manipulated by Naivas employees. According to the fintech, some purchases entered through its platform were recorded at significantly higher values before being reversed as typing errors. A transaction worth KES 10,000, for example, could appear as KES 100,000 before being cancelled. FlexPay says Naivas employees earned a 1% incentive on sales made through its platform and alleges that inflated entries could have increased those payouts.

Its audit reportedly identified more than KES 300 million in transactions displaying that pattern, although this does not mean KES 300 million was stolen or lost. The company has accused some Naivas employees of deliberately manipulating sales records and says it requested a joint investigation into the discrepancies. TechCabal could not independently establish whether the transactions were intentionally altered, and the allegations remain unproven.

FlexPay also claims it transferred KES 3.07 million to Naivas on May 5, after the dispute had escalated, but that the supermarket neither acknowledged nor credited the payment. Its position is that the companies needed to reconcile their accounts before determining the final amount owed. The fintech says their contract provided for negotiation, followed by mediation and arbitration if necessary, but that a requested meeting never took place.

How the payment dispute became a police case

Police became involved while the disagreement over the accounts was still unresolved. On March 31, FlexPay's lawyers wrote to the ODPP complaining about what they described as misuse of the criminal justice system, arguing that a contractual dispute was being pursued through criminal investigations. The company subsequently lodged its own complaint with the DCI's Economic Crimes Unit on April 2, asking investigators to examine the suspicious transactions it had identified.

FlexPay wrote to prosecutors again on April 9, prompting the ODPP to request an update from the DCI's Nairobi office five days later. The investigation nevertheless continued, and on May 5, FlexPay finance executive Dennis Karanu Mwangi recorded a statement with detectives, who warned him that he was a suspect in a stealing-by-agent investigation. According to the company's lawyers, its directors continued receiving police summonses while the disputed financial claims remained unsettled.

A DCI officer familiar with the investigation told TechCabal that Naivas had approached detectives seeking assistance in recovering the money. The officer also alleged that FlexPay's directors faced repeated calls, threats and demands for payments during the investigation. TechCabal could not independently verify those allegations, and neither Naivas nor the DCI had immediately responded to its requests for comment.

The investigation culminated in the arrests of Maina and Mwangi in early September. The two spent a night at Kilimani Police Station before being released on police bond. In its September 2 announcement, the DCI said the directors had diverted funds entrusted to them for onward remittance and were expected to face charges of stealing by agent under Section 283(b) of the Penal Code. The agency also indicated that other suspects were still being pursued.

On September 9, FlexPay's lawyers submitted a 15-page document asking the Director of Public Prosecutions not to approve the charges. They argued that the investigation failed to account for the unresolved contractual claims and urged prosecutors to consider the company's complaint concerning Naivas employees. FlexPay has since taken the dispute to court, naming Naivas, the DCI and the ODPP.

The lawsuit challenges the circumstances surrounding the criminal investigation, but FlexPay's account does not establish that the alleged theft never occurred. Naivas maintains that it was owed money collected on its behalf, while the fintech insists the amount cannot be determined without addressing the disputed transactions, unpaid reimbursements and payments it says were overlooked. Neither the alleged diversion of funds nor FlexPay's accusations against Naivas and the investigators have been established in court.

The documents reported so far show that the KES 31.2 million was already being contested months before the founders were arrested. Whether that amount represents money unlawfully diverted from Naivas, an outstanding contractual payment or a balance affected by the competing claims remains unresolved.