Real-money gaming platform WinZO has approached the Karnataka High Court, challenging the Enforcement Directorate's search and seizure operations at their office between November 18 and November 22, Moneycontrol has learnt.
WinZO has filed a writ petition, seeking to have the ED’s actions at its office declared "illegal" along with a stay on the agency's directive to freeze its assets.
Why did ED raid WinZO's offices and arrest its co-founders?
This move comes more than a week after ED arrested co-founders Saumya Singh Rathore and Paavan Nanda on money laundering charges.
The arrests follows searches conducted last month at four WinZO locations in Delhi and Gurugram, during which the agency froze assets worth Rs 505 crore in the form of bank balances, bonds, fixed deposits, and mutual funds under Section 17 (1A) of the Prevention of Money Laundering Act (PMLA).
ED stated it initiated the investigation based on FIRs filed against WinZO on the grounds of cheating, blocking of accounts, impersonation, and misuse of PAN. The complainants also alleged that their KYC details were misused and that they suffered substantial losses due to "fraudulent activities" and "cheating" by WinZO and others.
What did ED's investigation into WinZO reveal?
On November 24, ED said its investigation found that WinZO engaged in "criminal activities and unscrupulous practices i.e. customers were made to play with algorithms or software without being made aware of the fact that they are playing with software or algorithms and not with humans in real-money games".
The probe also revealed that WinZO prevented or limited withdrawals of monies held by the customers in their wallets, and that about Rs 43 crore is still being held by the company without being refunded to players, despite a ban on real money games since August 22, the agency said.
That said, the online gaming law is yet to come into effect and the draft rules, released on October 2, proposed a 180-day window for gaming companies to repay funds owed to users once the law gets operational.
The agency also said its investigation found WinZO operating real money games in markets such as Brazil, the United States and Germany from India using the same platform as its Indian entity.
About $55 million (Rs 489.90 crore) has been parked in a bank account in the United States held in the name of WinZO US Inc, which the ED described as a shell company, since all operations, day-to-day activities, and bank account management are handled from India.
What does WinZO do?
Started by Paavan Nanda and Saumya Singh Rathore, WinZO offers over 100 games in 15 Indian languages developed by third-party game developers from around the world on its platform. It has raised a total of $100 million across multiple financing rounds from investors such as Griffin Gaming Partners, Maker’s Fund, Courtside, and Kalaari Capital until now.
WinZO had discontinued its real-money gaming business in India in August after the government introduced an online gaming law that placed a blanket ban on online money games, where a user makes a deposit, directly or indirectly, with the expectation of earning winnings on that deposit.
In recent months, the company had forayed into newer areas such as microdramas and digital gold investments.
It had also introduced a feature called ‘WinZO Socials’ that allowed users to chat or speak with astrologers as well as virtual experts that offer online assistance in fields like job coaching, exam preparation, fitness training and food advice.
WinZO’s mobile app and website are however “under maintenance due to a technical issue” at present, which has left users unable to access the platforms. A company spokesperson recently told Moneycontrol that a server disruption is causing the outage, adding that users’ money remains fully safe and protected at all times.
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