Karnataka High Court Awaits ED’s Response to Winzo’s Legal Plea
The Karnataka High Court has requested a formal response from the Directorate of Enforcement (ED) regarding a petition filed by the gaming platform Winzo. The petition seeks to overturn a trial court’s decision to acknowledge a money laundering case against the company. This request for a response was made by Justice M Nagaprasanna in the case titled Winzo and ors v Directorate of Enforcement.
Winzo, along with its founders Paavan Nanda and Saumya Singh Rathore, and several subsidiaries located both in India and internationally, have moved this plea. Justice Nagaprasanna has issued a notice to the ED, asking it to file its response by July 22, prior to the next scheduled hearing.
Allegations of Algorithmic Manipulation and Money Laundering
The ED has built its case on claims that Winzo’s gaming operations involved algorithmic manipulations, including the use of bots. These actions allegedly led to unjust profits totaling ₹177 crore. The agency further alleges that there was a diversion of funds to overseas subsidiaries, with the laundering of illicit proceeds through cloud services hosted on Amazon Web Services (AWS).
Additionally, the ED has accused Winzo of misusing the identities of a large number of its users. It claims that the company engaged in transnational fund transfers amounting to approximately USD 55 million. The case initiated by the ED is based on predicate offenses detailed in FIRs filed in Bengaluru, Rajasthan, and Delhi.
Winzo’s Defense Against Allegations
Winzo argues that the FIR in Bengaluru has already been annulled by the High Court, while closure reports have been filed for the other FIRs where the company was not explicitly named. Despite this, a trial court on May 2 acknowledged the ED’s case against Winzo under Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA).
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The company contends that the trial court’s decision is unsustainable because the ED’s complaint was initially based on FIRs that have since been quashed or closed. Winzo also highlights that the ED is now citing FIRs from Gurugram and Nagpur, which were lodged after the ED’s case was registered, to justify the continuation of its case.
Furthermore, the Punjab and Haryana High Court has restrained the ED from taking coercive action against Winzo in the Gurugram case, although the investigation may proceed. This case involves allegations of Winzo using bots to outplay genuine participants in real-money games, allegations that Winzo has firmly denied.
Request for Quashing of Trial Court’s Order
Winzo and its representatives have argued that the trial court failed to adequately consider the situation when it took cognizance of the ED’s complaint. Consequently, they have appealed to the High Court to overturn the trial court’s May 2 order and halt subsequent proceedings.
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In an effort to halt proceedings at the trial court until the High Court reaches a final decision, Winzo has also requested an interim stay. The petition was filed by Advocate Rohan Kothari.
