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Gaming Industry Under Scanner: Enforcement Directorate Freezes Bitcoin Worth ₹12.83 Crores From Kolkata in E-Nuggets Fraud Gaming App Case

Gaming Industry Under Scanner: Enforcement Directorate Freezes Bitcoin
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  • Namita Ghosh September 30, 2022
  • 3 Minutes Read

Only yesterday, we reported how the Enforcement Directorate (ED) has been keeping a hawk`s eye on the country`s online gaming sector. The agency and tax authorities have started rounding up professional gamers and companies for alleged irregularities in tax payments and fraud cases.

After seizing deposits worth ₹68 Crores from the accounts of gaming company Garena’s payment facilitator, Coda Payments, the ED has frozen Bitcoins worth ₹12.83 Crores from a Kolkata-based mobile app, E-Nuggets.

The ED made the seizure on September 28, hours after Kolkata Police recovered ₹14.53 Crores from Khan’s cryptocurrency wallet. The action was taken on the basis of a complaint by the Federal Bank authorities against the app owner, Aamir Khan. An ED team seized cryptocurrency worth 77.62710139 Bitcoins from a Binance crypto exchange belonging to Khan.

The ED tweeted the details – “ED has frozen cryptocurrencies, 77.62710139 Bitcoins worth Rs 12.83 Cr. approx. under PMLA, 2002, in respect to an investigation conducted against one Aamir Khan & others relating to the Mobile Gaming App., namely E-nuggets. Earlier, ED had seized Rs. 17.32 Cr cash in the case.”

On September 10, the ED raided the company’s office in Kolkata and Khan and his father, Nesar Ahmed Khan’s residence in the Garden Reach area of Kolkata, seizing ₹17.32 Crores in cash.

Khan was taken into custody by Kolkata police’s detective department from Ghaziabad, UP, on September 24. He will be produced before a lower court on October 8.

Binance, in a statement, said: “The transparent nature of blockchain means that the transactions are publicly available and traceable – which is not an option with traditional financial transactions. Every day, Binance assists many law enforcement investigations in detecting criminal activities. We can confirm that Binance froze the funds at the request of the Enforcement Directorate. It’s our position to cooperate fully and collaboratively with all legally valid requests and inquiries.”


The E-Nuggets Case – Fooling Customers

The E-Nuggets app acted as a platform for users to play games, invest money, and earn commissions that they could stack up and get remitted to their bank accounts. As the app gained popularity, users began investing more significant amounts in the app.

The app users were dealt a big shock when the app suddenly stopped functioning one day. The owner, Aamir Khan, collected substantial investments from users, stopped all withdrawal transactions, and all the data was wiped out entirely along with user profiles.

Kolkata Police found that the app was operated from an international location and controlled through a remote access computer. Around 2000 SIM cards, laptops, and 3,000 ATM cards were seized from the company’s office in Bindnagar.

In preliminary investigations, the ED discovered that Aamir Khan was transferring some money collected through this fraud overseas through cryptocurrency exchanges.


India’s Gaming Sector – A Grey Zone

India’s gaming sector is charting unprecedented growth, calling for an urgent need to bring in a licensed, regulated regime.

For a long time, India’s gaming sector components like online operators and industry self-bodies like All India Gaming Federation (AIGF) have been demanding the same, arguing that regulation rather than a complete ban is the only solution forward.

Karnataka and Tamil Nadu state governments have moved to ban all forms of real-money gaming after a spate of suicides by people who had lost money playing online games. While respective High Courts quashed the bans, the appeals are being heard by the Supreme Court.

Only recently, the Union government set up an inter-ministerial panel to look into regulating the online gaming sector.

A case in point is the Singapore-based gaming publisher Garena which runs popular games like Free Fire, Call of Duty Mobile, Teen Patti, etc. It is alarming that the company’s payment facilitator Coda Payments India Pvt Ltd (CPIPL), duped children of money by processing payments for online digital tokens without taking them through the entire authentication process.

The glaring irregularities have also attracted the attention of tax authorities. Last month, the Central Board of Direct Taxes urged the winners of online games to file updated income tax returns (ITR-U) for their previous two-year income and pay the applicable taxes.

The DGGI has begun sending notices to gaming companies and several top gamers, making an outstanding tax claim worth ₹28,000 Crores. Only last week, the DGGI issued a record ₹21,000 Crores show cause notice on Bengaluru-based online gaming company, Gameskraft Technology Private Ltd.

While the tax imposed on gaming operators and players is a burning issue, the absence of regulation for the sector is hitting the industry hard.

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