Key Highlights
- •The Enforcement Directorate (ED) conducted raids on 11 locations across Bengaluru, Delhi, and Gurugram.
- •Allegations include manipulated game algorithms that disadvantage players and the potential laundering of funds through cryptocurrency.
- •Investigators discovered crypto wallets belonging to promoters, indicating a possible route for money laundering.
- •These raids follow India's recent ban on real-money gaming, increasing pressure on platforms already undergoing restructuring and facing previous financial fraud cases.
The Enforcement Directorate (ED) carried out surprise searches on the offices and senior executives of online gaming firms Gameskraft and WinZO on November 18. The agency acted on complaints alleging that the platforms may have tampered with their game algorithms and routed money through cryptocurrency channels.
Searches Conducted at 11 Spots
According to individuals familiar with the operation, the agency covered 11 locations simultaneously, including 5 in Bengaluru, 4 in Delhi, and 2 in Gurugram. Investigators visited both the corporate offices of the companies and the residences of key executives, suggesting a thorough examination of personal financial records alongside company data.
FIR Accuses Platforms of Tilting Games Against Users
The searches were initiated following First Information Reports (FIRs) filed by several individuals who claimed that the platforms were not operating with a fair algorithm. A source indicated that victims' allegations included manipulated app algorithms that put gamers at a disadvantage. The searches also revealed that promoters own crypto wallets, suggesting potential laundering activities through cryptocurrencies.
The ED is expected to meticulously examine transaction logs, code history, and communication records to determine if game outcomes were artificially influenced.
Crypto Trail Under Scrutiny
The discovery of crypto wallets allegedly linked to the promoters has introduced a new dimension to the investigation. Officials are now investigating whether player deposits or winnings were channeled through cryptocurrencies, possibly to evade detection or taxation. This investigative path has become increasingly common in ED cases involving digital platforms, particularly after similar patterns were observed in betting and investment fraud cases.
Raids Follow Government's Ban on Real-Money Games
These raids occur just months after the Union government implemented new online gaming rules, which effectively banned all real-money games where users deposit funds with the expectation of earning winnings. Following the enforcement of these new regulations, both Gameskraft and WinZO ceased their real-money operations in India. However, their applications continue to offer non-monetary formats and content.
Gameskraft's Ongoing Internal Fraud Case
Gameskraft, which operated the rummy platform Rummyculture, has been dealing with a separate controversy. The company previously accused its former Chief Financial Officer (CFO), Ramesh Prabhu, of siphoning off ₹270.43 crore over a period of nearly five years. An FIR was filed at the Marathahalli police station in Bengaluru based on the company's complaint. The alleged fraud, dating back several years, raised concerns about the company's internal control mechanisms. The current ED probe adds to Gameskraft's challenges, as investigators are likely to review older financial records.
WinZO's Wider Footprint
WinZO offers a diverse portfolio of over 100 game titles, available in 15 Indian languages and developed by a range of domestic and international creators. In recent years, the company has expanded its presence into markets like the US and Brazil, which have less stringent regulatory environments compared to India. Domestically, WinZO has been actively adapting its business model and operations since the government's ban on money-based gaming.
A Sector Under Pressure
The ED raids highlight the increasing pressure on India's online gaming industry, which has experienced rapid growth, faced sudden regulatory shifts, and is now subject to more stringent enforcement. Since the rise in popularity of money-involved digital games, regulators have expressed concerns regarding unfair game mechanics, misleading advertisements, and opaque financial transactions, especially with cryptocurrency emerging as a favored method for fund transfers. Further details are anticipated as the ED concludes its seizure of devices and data. Both Gameskraft and WinZO have been approached for comments, and their responses are pending.