Karnataka High Court Seeks ED’s Response on WinZO’s Plea to Quash Money Laundering Trial
The Karnataka High Court on Monday issued notice to the Directorate of Enforcement (ED) on a petition filed by online gaming platform WinZO, its founders Paavan Nanda and Saumya Singh Rathore, and several group entities seeking to quash criminal proceedings initiated under the Prevention of Money Laundering Act (PMLA). Justice M. Nagaprasanna directed the ED to file its response, with the matter scheduled for further hearing on July 22.
The petition challenges a trial court order dated May 2, which took cognisance of the ED’s prosecution complaint alleging that WinZO’s gaming platform manipulated games through algorithms and bots, resulting in alleged wrongful gains of around ₹177 crore. The ED has also alleged diversion of funds to overseas subsidiaries, laundering of proceeds of crime through cloud infrastructure, misuse of user identities, and cross-border fund transfers worth nearly USD 55 million.
WinZO has, however, argued that the very foundation of the money laundering case has collapsed. According to the company, the ED’s prosecution was originally based on predicate offences registered in Bengaluru, Rajasthan and Delhi. The Bengaluru FIR has already been quashed by the High Court, while closure reports have reportedly been filed in the remaining FIRs, where the company claims it was not even named as an accused. The company contends that without a valid scheduled offence, the PMLA proceedings cannot legally survive.
The gaming platform has further objected to the ED’s subsequent reliance on FIRs registered in Gurugram and Nagpur, arguing that these cases were instituted only after the money laundering investigation had already commenced. WinZO has maintained that later-registered FIRs cannot retrospectively validate an investigation that was allegedly without jurisdiction at its inception.
In its submissions before the High Court, WinZO also referred to interim protection granted by the Punjab and Haryana High Court in relation to the Gurugram FIR, where the ED has been restrained from taking coercive action even though the investigation continues. The company has denied allegations that it used bots to defeat genuine players in real-money games and has questioned the ED’s assertion that the alleged transactions constitute “proceeds of crime” under the PMLA.
The petition further alleges that the trial court failed to properly examine whether the essential legal requirements for taking cognisance under the PMLA had been satisfied. On this basis, WinZO has sought quashing of the trial court’s order along with a stay on all further proceedings until the High Court decides the legality of the prosecution.
The case represents another significant legal battle in the widening regulatory scrutiny of India’s online gaming industry. The High Court’s eventual decision could clarify the extent to which money laundering prosecutions under the PMLA can continue when the underlying scheduled offences are quashed or closed, an issue that has wider implications for enforcement actions against digital gaming platforms and technology companies.
