The searches were part of an ongoing investigation against Coda Payments and ‘Garena Free Fire’ mobile game under the PMLA, 2002
Coda India acted as an agent of Singapore-based parent entity and was used as a conduit to remit funds outside India: ED
The ED alleged that Coda Payments was targeting young children, who play mobile games, to make unauthorised payments.
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The Enforcement Directorate (ED) on Tuesday (September 27) said that it conducted searches at three premises linked to gaming top-up platform Coda Payments India in connection with a money laundering probe.
As part of the crackdown, the agency has frozen an amount of INR 68.53 Cr lying in fixed deposits, wallets located with multiple payment gateways and bank accounts belonging to the Singapore-based company.
The searches were part of an ongoing investigation against Coda Payments and ‘Garena Free Fire’ mobile game under the Prevention of Money Laundering Act (PMLA), 2002 and multiple FIRs registered against the two firms.
In a statement, the enforcement agency said that further investigation into the matter is currently underway.
“It is alleged that M/s Coda Payments India which facilitates and collects payments from end users (mostly unsuspecting children) of games like Garena Free Fire…is resorting to unauthorised deductions from the end users of these games in the name of selling digital tokens to end users,” the ED said.
The agency further alleged that Coda Payments was targeting young children, who are generally the users of these games, with no technical know-how to make unauthorised payments.
Describing the modus operandi, the ED said that the top-up platform designed its payments mechanism in a way that allowed users to grant permission to make subsequent payments without any authentication.
“As the children are not aware of these technical terms, they just click on the notification in a routine manner and end up giving authorization to make all future payments without any further authentication,” the agency added.
Codashop is the flagship product of the company and helps digital content providers monetise their products and services. The website allows users to buy digital tokens which, in turn, enable them to enhance their playing experience in the game.
Offices of Garena, which publishes Free Fire, were spared the brunt of raids as the company has no presence in India and operates out of Singapore.
It is pertinent to note that Garena Free Fire was among the 54 apps and games of Chinese origin that were banned in February this year. However, the lighter version of the game, Garena Free Fire MAX, continues to be listed on app marketplaces and has not been banned in the country.
Under Regulatory Fire
Coda is also under fire for violation of PMLA norms. Terming Coda India as a ‘conduit’ to remit funds outside India, the ED said that the Indian arm of the firm is only incorporated to ‘act as an agent’ of its Singapore-based parent company.
The Indian entity also allegedly collected money from users in the name of sale of digital content while the actual services were routed through Coda Singapore. The ED said that there was no actual sale or purchase of digital content by Coda India.
“It is only a conduit to remit funds outside India. Till date the amount collected by CPIPL (Coda India) is INR 2,850 Cr, out of which, INR 2,265 Cr has been remitted outside India after retaining (a) certain percentage of revenue for payment of taxes and nominal profits,” the statement added.
Of late, the ED has cracked down on many new-age tech startups in the country as part of its various money laundering probes. Earlier this month, the agency conducted raids at the premises of fintech majors Paytm and PayU.
The development came days after it conducted another set of searches at the premises of Easebuzz, Paytm, Cashfree and Razorpay in connection with its probe into the Chinese loan apps case. A cumulative amount of INR 46.67 Cr associated with various Chinese digital loan sharks was frozen during the raids.
Previously, it had also frozen assets totalling INR 370 Cr belonging to a Bengaluru-based company which were lying with the Indian entity of beleaguered cryptocurrency platform Vauld. The agency is investigating multiple crypto exchanges as part of its probe in the illegal loan apps.
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