The Mahadev scam, which exposed the dark underbelly of India’s illegal online betting apps, did not end with the closure of the shady application, few arrests, and tracing a money trail from Chhattisgarh to Dubai. More than two dozen offshore gaming applications are currently under the scanner of the Enforcement Directorate (ED) for remitting and round-tripping funds, persons in the know told ET.
Sources in the federal probe agency suspect that losses suffered by gullible and ignorant gamblers could cross Rs 1 lakh crore, with the money moved around as cryptocurrencies, payments for fake service imports, and investments in the stock market.
Once an illegal app is shut down by authorities, another, floated by the same actors or their partners, comes out of the woodwork — making it a tiring chase by agencies. These illicit apps are run by faceless operators who, along with an army of tele-callers and bookies, are based in UAE, Sri Lanka and a few South Asian countries.
The Directorate, it’s learnt, would make a concentrated effort to nab these applications by spotting their links in India. “Multiple probes are underway in different states and zones. A plan is in the works to take action against the India connections who are helping the foreign beneficiaries to round-trip money. This could break the chain,” said another source.
The compliance wings of many banks and the Reserve Bank of India have cautioned bankers to watch out while clearing payments for ‘service imports’ — a subterfuge for transferring funds to overseas parties.
However, ‘free withdrawals’ permitted by some of the smaller cryptocurrency exchanges is a loophole that many app operators are exploiting to move money across the border.
The money movement around an illegal app has two parts: first, collecting smaller sums from gamblers in hundreds of mule accounts opened in the names of vegetable vendors, small grocers, neighbourhood tailor, and autorickshaw drivers who are paid off small amounts for lending their IDs; second, funnelling the funds in layered transactions to current accounts of scores of private limited entities or fronts which undertake bogus imports to remit the money abroad.
THE CRYPTO CONDUIT
Sometimes, instead of fake imports, these fronts invest the money to buy stable cryptocurrencies (like USDT), and then move the cryptos from the exchange wallets to wallets of overseas app operators.
“This is not possible unless crypto exchanges allow withdrawals from an exchange wallet to the user’s personal wallet from where the coins are moved abroad. Larger platforms have stopped withdrawals, but it’s going on in a few smaller ones. This was clear from ED’s recent findings,” said a crypto industry person.
Recently, ED seized Rs 49 crore and arrested persons connected to Virtuous Payment, an entity which was allegedly involved in routing the proceeds from online betting. Outfits like Virtuous are ones ED is going after. Another 4 were arrested after ED found out that Rs 400 crore pool money from the illegal betting app FIEWIN was invested in cryptos which were subsequently moved to 8 Chinese nationals’ wallets with Binance, the world’s largest crypto exchange.
“This could be the tip of the iceberg as some estimates put transactions in illegal offshore betting and gambling apps at over Rs 2 lakh crore a year,” said Jay Sayta, a technology & gaming Lawyer, who fears that men behind these apps would be unruffled by actions like freezing of mule accounts, seizing some Indian assets or arrests of some agents or low-level staff of these websites. According to Sayta, “ED’s hands are tied to some extent because betting and gambling is not a scheduled offence under the Prevention of Money Laundering Act (PMLA) and ED can only act against those laundering proceeds of crime if there is a FIR registered by the local police for some scheduled offence under PMLA. As of now, ED springs into action only when there is a FIR of cheating (based on a complaint of some users of these apps) or forgery of KYC to open mule bank accounts.”
LIKE A CHAMELEON
Hidden in plain sight, several offshore illicit gambling apps raise crores everyday on all kinds of bets. While after the Mahadev fiasco some of the apps are no longer hiring top Bollywood stars to endorse their products, there continues to be a flurry of ads on Instagram, featuring small-time actors and music video artistes luring gamblers.
ED officials complain about lack of regulations and non-cooperation by tax havens coming in the way of tracing the money trail. “Much to our surprise, a new application was floated the very next day of an app ban, and a committed set of customers starting using the new app soon after they were informed through Whatsapp or Telegram,” said a senior government official privy to the probe.
Sayta feels that stronger measures including making betting and gambling a scheduled offence under PMLA, using Artificial Intelligence (AI) to swiftly block offshore betting websites — including mirror websites or websites frequently changing domain names — and better inter-agency coordination are required to tackle the menace.
Clueless about the laws they are breaking, gamblers are put off by the steep 28% indirect tax imposed by the government on the local, legitimate betting sites. As the “No GST” promise by the illicit, foreign apps look irresistible, the games continue to flourish in the shadowy, virtual world.
