MUMBAI: Investigators are struggling to nail overseas gaming and betting apps as they siphon out earnings in India by converting them to crypto currency and using layers of shell firms to dodge tax laws.One of the biggest such networks now under probe is a Cyprus-based group known as Parimatch, which even advertises on TV during local sports leagues.102755161Recently, Directorate General of Good & Services Tax Intelligence (DGGI), Mumbai, busted one among the hundreds of such networks working in India for Parimatch.The network had collected Rs 700 crore from users of gaming apps in India and channelled it out by converting it into crypto currency.Officials said they spent months tracking the network by probing the antecedents of 50 firms and individuals in Delhi and 350 in Kolkata.Most such gaming companies headquartered in tax havens and operating illegally in India create multiple layers of communication and transactions cutting across international jurisdictions to avoid action.Dubai is a key transit point for the flow of funds through crypto.
Those working for the apps receive remuneration online without a formal agreement.Parimatch, for instance, communicates with its contacts in India only via email, phone or persons whose identity is never established.DGGI officials recently arrested the director of an unregistered payment aggregator on whose platform money was collected in the accounts of shell firms from those using Parimatch’s gaming and betting services.The funds were being transferred from the payment aggregator to bank accounts of shell companies.DGGI froze more than 400 bank accounts in the process.However, bulk of the funds had already been moved out of banks and converted into crypto.
The agency nabbed a crypto exchange operator in Mumbai handling one set of shell companies promoted by dummy directors.According to the crypto operator, Rs 96 crore money collected from users of apps had been converted into crypto currency.However, the probe could not proceed further as the accused had no knowledge of whom the wallet belonged to which he had transferred crypto money.The accused told officials that he executed the entire operation on the basis of detailed instruction received via e-mail and phone calls from “an unknown person.”The DGGI also questioned the dummy directors of the shell firms, who were paid a small sum to represent the firms through which crypto money was purchased and sent overseas.
Most were drivers, road-side vendors or people doing odd-jobs who had provided their details to a book-entry operator (who also facilitated hawala payment) in exchange for a few thousand rupees.The dummy directors said they knew money was coming through Parimatch apps into their accounts/wallets.
The directors said, “video KYC of their family members were used for opening the accounts/ wallets” by the crypto exchange operator.They claimed they were unaware of the amounts credited into their accounts and to whom it was transferred.Officials said the investigation has thus reached a dead-end.Similarly, the DGGI also traced some funds which were transferred to shell companies based in Kolkata.A Kolkata-based person handing these shell companies is suspected to have fled the country before DGGI could establish his identity.Officials suspect he had converted the money into crypto and sent it abroad.During the investigation, DGGI officials found it had broadcast advertisements using celebrity endorsements during live telecasts of local sports leagues.A senior executive of a TV network told DGGI officials in their statement that they had received instruction via email for telecasting the Parimatch ads and entered into an online agreement for it.Officials said media management companies similarly received instructions from Parimatch to hire celebrities for the ads by email.The Enforcement Directorate (ED) is investigating many such gaming and betting companies.Many are believed to be operating using shell companies but registered abroad in tax havens.These companies have no offices in India and only communicate by email, phone or through anonymous persons.
Sources said the Union ministry of home affairs has been apprised of the trend in order to consider curbs on such apps and websites on grounds of national security.Officials said there are high-end tools manufactured by Israeli companies to track crypto currency movement from wallets, but in this case efforts to deploy such technology did not work.An expert handling such tools said due to interoperability between blockchains allows users to access applications of different platforms and move crypto money rom one exchange to another.”But the movement of the crypto currency can be traced through advanced tools” he said..
