Gameskraft Accuses Ex-CFO Of Syphoning Off Company Funds

Already grappling with the fallout of the ban on real-money gaming, Gameskraft is now also facing a major internal crisis. 

As per The Hindu businessline, the company has accused its former group chief financial officer (CFO) Ramesh Prabhu of diverting company funds for personal investments in futures and options (F&O) trading. This, the gaming giant, said resulted in losses exceeding INR 250 Cr for the company.

This came to light after the gaming major reportedly filed an FIR with Bengaluru’s Marathahalli Police Station on September 9, initiating a formal investigation into the matter. The company has accused Prabhu of theft, criminal breach of trust, forgery, among others under various sections of the Bharatiya Nyaya Sanhita. 

In the FIR, Gameskraft also claimed that Prabhu admitted to the wrongdoings in an email addressed to management on March 5, adding that no other current or former employee of the company was involved in the matter. 

“Out of this amount, INR 211.53 Cr were wrongly recorded as “investments in the complainant company’s books of accounts. These ‘investments’ have a carrying value of INR 250.57 Cr as of 31 March 2024,” the FIR reportedly read.

The gaming major also reportedly alleged that it had to expense an additional amount of INR 19.86 Cr as “investments” in the fiscal year 2024-25 (FY25). As a result, Gameskraft had to write off INR 270.43 Cr in its financial statement for the said fiscal.

The first information report also underlined that Prabhu failed to report to work after March 1 this year, adding that there was no further communication from him after the email. “Any attempts on the part of the Complainant Company to contact the Accused or discern his whereabouts have been unsuccessful,” added the FIR.

Subsequently, Gameskraft terminated the CFO six months later in August. 

Inc42 has reached out to the company for a statement on the matter and this story will be updated upon receiving a comment. 

The Modus Operandi

As per the FIR, Prabhu reportedly allegedly misused a company account with RBL Bank, which he controlled exclusively. He is said to have transferred funds to his personal account and falsely reflected these as “investments” in the company’s books.

“He closely controlled this account, which only he had access to, and diverted/misappropriated funds for his personal use. These funds were transferred without any authorisation from the complainant. Gameskraft discovered he had transferred the funds to his personal bank account while the same were falsely reflected as ‘investments in the company’s books of accounts,” the FIR reportedly read.

Thereafter, Prabhu is said to have altered bank statements, fabricated records, and deleted (or inserted) line items in financial documents to cover his tracks. 

“To suppress evidence of his unauthorised conduct and prevent timely detection of these unauthorised trades, he created fake mutual fund statements in support of his claim that he made investments using the Company’s funds,” the FIR further added.

After the matter came to light, the company reportedly roped in two firms to conduct a forensic audit. Sources reportedly said that the impact of the fracas was subsumed in FY25, adding that the company is now strengthening its internal controls to prevent similar incidents in the future.

While noting that Prabhu’s actions resulted in the company filing inaccurate financial statements for multiple years, Gameskraft’s FIR sought legal action against the former executive for unlawfully diverting company funds into his personal bank accounts. 

Gameskraft’s Many Troubles

The development comes weeks after the Parliament passed the new online gaming Act, which banned all forms of online real money gaming in the country. Quickly afterwards, Gameskraft paused the RMG features of its rummy games. 

This came months after the company also paused its online poker platform Pocket52 in May amid the fallout of the 28% GST regime for RMG platforms. 

In October 2023, the GST Council imposed 28% GST on real money gaming. The tax was levied on the total value of bets for online games, irrespective of whether they are games of skill or chance. Previously, a lower 18% GST was levied, specifically on the platform fee for skill-based games.

Subsequently, the gaming major received a notice from the Directorate General of GST alleging tax evasion to the tune of INR 21,000 Cr. While the Karnataka High Court quashed the GST notice, the Supreme Court later on stayed the HC order.

Founded in 2017 by Prithvi Raj Singh, Deepak Singh, Rajkumar Taneja, and Sindhu Devi Jha, Gameskraft operated real money gaming platforms such as RummyCulture, RummyPrime, Playship and LudoCulture.