Winzo co-founders sent to 10-day ED custody in money laundering case

A special court in Bengaluru on Thursday extended the Enforcement Directorate (ED)-custody of WinZO co-founders Saumya Singh Rathore and Paavan Nanda by 10 days in a money laundering case..The case alleges that the gaming platform engaged in cheating, algorithm manipulation, misuse of customer data and diversion of funds.Rathore and Nanda were arrested on November 26 after they appeared before the ED in compliance with the summons issued to them on November 22.Following their arrest, the Principal City Civil and Sessions Judge M Chandrashekar Reddy had sent them to ED custody for one day. On November 27, the Court extended their custody by ten more days..The Court passed the order after ED Special Public Prosecutor Madhu N Rao submitted that substantial proceeds of crime had been generated and further custodial interrogation was required to trace the fund flow and digital assets..ED had conducted search operations between November 18 and 22 at four locations in Delhi and Gurugram, including WinZO’s offices and connected premises. Following the searches, ED froze ₹505 crore worth of bank balances, bonds, FDRs and mutual funds under Section 17(1A) of the Prevention of Money Laundering Act (PMLA).The money laundering probe was initiated following registration of multiple FIRs alleging cheating, blocking of user accounts, impersonation, misuse of PAN numbers and fraudulent withdrawals. The complainants alleged that their KYCs were misused and that they suffered losses due to deceptive practices by WinZO and others..According to ED, WinZO was operating real-money games (RMGs) in foreign jurisdictions such as Brazil, the United States and Germany from India using the same platform. Even after the Union government banned RMGs on August 22, the company allegedly held back ₹43 crore belonging to customers. The amount was supposed to be refunded.As per ED's case, users without any disclosure were made to play against algorithms and not real players. Their withdrawals were also restricted. Thus, the funds collected from players are being treated as “proceeds of crime”.ED also alleged diversion of funds to the company’s overseas entities. In a press release, the ED said that USD 55 million (₹489.90 crore) was transferred to WinZO US Inc, which the ED describes as a shell entity, with operations and control allegedly exercised from India..Advocate Rohan Kothari represented Rathore and Nanda..Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.