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A probe by Indian tax officials into Ukrainian operator Parimatch and other online gambling companies has confirmed the underground industry’s reliance on cryptocurrency to remit illegal earnings overseas.
The Directorate General of Goods and Services Tax Intelligence (DGGI) has established that cryptocurrency, a layered mass of shell companies, anonymised communications and dummy directors are major planks in underground operations, the Times of India reported on Wednesday (August 16).
Parimatch, a Ukrainian operation based in Cyprus with Curaçao registrations, remains a key focus of the DGGI probe into the industry following the arrest of an alleged Parimatch director by the DGGI’s Mumbai Zonal Unit in April this year.
The DGGI has since discovered that Parimatch’s alleged network of 50 companies or individuals in Delhi and another 350 in Kolkata has remitted some 7bn rupees ($84m) overseas, with at least half of that amount being first converted into cryptocurrency.
The DGGI has also arrested the director of an unregistered payments company allegedly servicing Parimatch shell accounts, as well as the operator of a crypto-exchange operator in charge of the accounts, the report said, without naming them.
Although the probe has frozen some 400 accounts linked to the Parimatch network, they were largely emptied of funds by the time investigators identified them, it said.
Investigators also interrogated what the report called “dummy directors” of the Parimatch network’s shell companies. The “directors” were largely drivers, vendors and other semi-employed labourers, the report said.
The Times of India report also identified Dubai as a “key transit point for the flow of funds through crypto”, with staffing networks remunerated informally and communication restricted to email, telephone or unnamed go-betweens.
Despite additional DGGI discoveries in Kolkata involving network infiltration of sports leagues through illegal advertising and celebrity endorsements, investigators have hit a wall because of the mass of semi-anonymous communications within and among networks, the report said.
The alleged link between Parimatch and cryptocurrency laundering of revenue was first suggested in the DGGI’s statement on the probe in April when it named Noida, Uttar Pradesh-based crypto-trading platform IBlock Technologies as the sole manager of Parimatch’s India business.
A DGGI official at the time was quoted as saying that payments were being made via “international cards and cryptocurrencies”, according to the Economic Times, but no reference was made to the volume of payments or their reliance on crypto.
The DGGI is attacking the regulated and unregulated online gaming industries on two fronts.
The investigation into underground operations that avoid all GST is combining with the DGGI's aggressive campaign to reclaim unpaid GST from above-board operators that have only paid 18 percent GST on gross gaming revenue.
Armed with a recent clarification by the GST Council that the industry must pay a 28 percent GST on customer deposits and rushed legislative amendments, the DGGI confirmed on Wednesday that it will attempt to recover some 450bn rupees ($5.4bn) from the industry.
The Supreme Court is likely to intervene following the central government’s appeal against a Karnataka High Court ruling that voided the GST calculation for skill games with stakes.
