‘Fraud, algorithmic manipulation’: ED freezes assets worth Rs 523 crore in major crackdown on 2 gaming platforms

The crackdown comes months after the Centre banned real-money games on August 22. The law was enacted to regulate the online gaming industry and protect consumers from exploitation. However, both platforms allegedly continued holding substantial customer funds in violation of the ban, prompting the money laundering investigation.

Responding to the searches, WinZO said in a statement that the company complies with “all applicable laws” and has been cooperating with the investigation.

Pocket52 accused of manipulating game outcomes
According to the central agency, the probe into Pocket52 was initiated following a First Information Report (FIR) registered by the Karnataka Police alleging large-scale fraud involving manipulated game outcomes, player collusion, technical glitches, and withdrawal restrictions. One complainant alone reported losing over Rs 3 crore due to what authorities described as “systemic cheating”.

During search operations at the offices of Nirdesa Networks, Gameskraft Technologies Pvt Ltd, and the residential premises of its directors, ED officials seized incriminating devices, including mobile phones and laptops, and backed up voluminous data.

The probe revealed that numerous users had raised complaints about manipulation and lack of transparency, with the company allegedly exploiting users while failing to compensate them for losses. ED officials noted that the platform had removed features like transaction history and ignored responsible gaming practices.

Despite the Union government’s ban on real-money games through the Promotion and Regulation of Online Gaming Act enacted on August 22 this year, Pocket52 was found holding over Rs 30 crore in escrow accounts without refunding customers.

Eight bank accounts serving as escrow accounts for payouts, with a combined balance of approximately Rs 18.57 crore, have been frozen under Section 17(1A) of the Prevention of Money Laundering Act (PMLA), 2002.

FIRs against WinZO Games on cheating, misuse

In another operation, ED froze proceeds of crime worth around Rs 505 crore possessed by WinZO Games in the form of bank balances, bonds, fixed deposit receipts, and mutual funds.

The investigation was launched based on multiple FIRs filed against WinZO on grounds of cheating, account blocking, impersonation, and misuse of Permanent Account Number (PAN) cards. Complainants alleged that their KYC (Know Your Customer) details were misused and they suffered substantial losses due to fraudulent activities.

The ED’s probe uncovered that WinZO operated real-money games in foreign countries, including Brazil, USA, and Germany from India using the same platform as the Indian entity. Even after the August 22 ban, the company continued holding Rs 43 crore belonging to gamers without processing refunds.

ED investigations revealed that WinZO engaged in unscrupulous practices by making customers play against algorithms and software without disclosing this fact. Players believed they were competing against real humans in real-money games, when in reality they were playing against rigged systems.

The company also allegedly prevented or limited withdrawals of money held in customer wallets, while generating proceeds of crime through bet amounts placed and lost by real customers through manipulated algorithms and software.