India

An ED raid freezes accounts of a fintech firm in a laundering probe

Enforcement Directorate (ED) agents searched three Coda Payments India premises on Tuesday to investigate money laundering allegations.

Coda’s accounts were also frozen by the ED, resulting in a total balance of Rs 68.53 crore, to prevent the company from alienating proceeds of crime, according to the agency.

A number of FIRs have been filed against Coda Payments and the ‘Garena Free Fire’ mobile game, according to the ED.

In the name of monetising and generating revenue for web and game publishers, Coda Payments India Pvt Ltd facilitates and collects payments from end users (mainly unaware children) of games such as Garena Free Fire, Teen Patti Gold, Call of Duty, etc., the ED is accused of deducting money from end users of these games in the name of selling digital tokens…which end users can use to enhance their playing experience.

According to the agency, game developers such as Garena and Coda Payments India Pvt Ltd deliberately designed the payment mechanism in such a way that a notification appears after the first successful transaction asking for permission to make subsequent payments without any authentication. Since children do not understand these technical terms, they click on the notification routinely and entrust the payment to be made without further authentication.

Garena, the publisher of ‘Free Fire’, operates from Singapore and has no physical presence in India.

The ED reported that during Tuesday’s search, Coda Payments India was found to have been incorporated solely to act as an agent of Coda Payments Singapore Pvt Ltd, allegedly for the purpose of collecting money from users and remitting it to the parent company.

Throughout the past few years, M/s CPIPL has collected money under the guise of selling and purchasing digital content, and remitted it to its parent company in Singapore. In reality, Codashop, which sells tokens, is managed by Coda Singapore; CPIPL does not sell or buy digital content,” the ED explained.

The agency noted that Coda India is “only a conduit for remitting funds outside India”. CPIPL collected Rs 2,850 crores to date, of which Rs 2,265 crore was remitted outside India after retaining a certain percentage of revenue for taxes and nominal profits.

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