Consumer Rights Body Calls For Investigation In NFT Platform Rario On Alleged PMLA Violations

Consumer Online Foundation, a consumer rights body, has called on the Union Minister of Finance Nirmala Sitharaman to investigate NFT platform Rario over allegations of violations of the Prevention of Money Laundering Act (PMLA), 2002.

The industry body has written to the finance minister to investigate the startup’s business activities and compliance with PMLA and taxation laws concerning virtual digital assets (VDAs) and cryptocurrency, per an ET NOW report.

Founded in 2021 by Sunny Bhanot and Ankit Wadhwa, Rario enables fans to engage as a community, giving them a chance to own a piece of cricket history through digital collectibles across player cards, video moments, and cricket artefacts.

However, in the letter to the FM, Consumer Online Foundation’s managing trustee Bejon Kumar Mishra said the fact that Rario is an NFT platform is not obvious to a visitor to its website.

Mishra reportedly stated that the industry body’s initial study revealed that Rario violated the applicable taxation provisions for VDAs and cryptocurrency in India.

The managing trustee alleged that Rario was misleading customers by adopting unethical marketing practices which are not only deemed unfair trade practices but also violate consumer rights. Mishra added that Rario’s current KYC processes are also tantamount to a violation of India’s PMLA laws.

Incidentally, the finance ministry has recently notified that entities dealing in VDAs will be considered ‘reporting entities’ under the PMLA and need to maintain KYC details or records of documents evidencing the identity of its clients and beneficiaries, along with account files and business correspondence relating to its clients.

Further, Mishra and Consumer Online Foundation alleged that Rario uses prominent cricket to mislead and lure cricket fans to buy and sell player cards on its platform ‘in an unethical and illegal manner’, Mishra said.

He added that the NFT marketplace was facilitating international transactions under the Liberalised Remittance Scheme (LRS) of the Foreign Exchange Management Act (FEMA) 1999, without any limits on the transactions.

In a statement given to Inc42 on the allegations, Rario said, “We adhere to all the KYC requirements and fully comply with the applicable laws, including taxation.”

The allegations from Consumer Online Foundation come as the Dream Sports-backed startup is embroiled in a legal dispute with Web3 fantasy platform Striker.

With Rario, fans can buy, sell, and trade NFTs through fiat-only mediums – credit cards, debit cards, and bank transfers. The startup claims to have exclusive partnerships with multiple cricket boards and cricket tournaments. Rario has a roster of more than 900 international cricketers.

The NFT startup made headlines when it picked up $120 Mn last year in a round led by Dream Capital, the venture capital arm of gaming unicorn Dream11 parent Dream Sports. Rario counts Alpha Wave, Animoca Brands, Presight Capital, Kingsway Capital and Sachin Tendulkar among its investors.

Update | April 10, 11:40 AM

The story has been updated with Rario’s statement on the matter.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.