Betting Syndicates Use AI Investments As Cover To Move Suspected Proceeds Abroad, ED Probe Reveals

Mumbai: The illegal betting syndicate is allegedly attempting to give its ill-gotten gains a technology makeover, with the Enforcement Directorate (ED) suspecting thousands of crores being routed abroad as purported investments in artificial intelligence (AI), AI solutions and technology ventures.

Parimatch Trail Unearthed

The federal probe agency’s investigation into Parimatch, a Cyprus-based betting platform banned in India but allegedly continuing to operate through multiple mirror websites, has unearthed one such trail, with more than Rs 200 crore in suspected proceeds of crime (PoC) allegedly routed out of India through purported investments in overseas technology ventures, including entities claiming to operate in AI and AI solutions. The agency has traced the funds to remittances made by two Delhi-based companies to entities in Singapore, which investigators found to have limited commercial substance.The transactions are now being examined as part of a suspected mechanism to disguise betting proceeds as legitimate overseas investments in technology ventures.

₹2,000 Crore Route Suspected

Sources said the same structure is suspected to have been used by other betting applications to move their illicit proceeds abroad.Based on the transactions identified so far, more than Rs 2,000 crore has been routed through such purported overseas investment structures, the sources said. Investigators have examined the incorporation dates, directors, financial activity and valuations of the entities involved and found indications that several of the companies were created primarily to facilitate the movement and layering of betting proceeds.

“With these applications under tremendous scrutiny by multiple agencies, new avenues are being tapped by betting app operators to move the PoC out of India. Many of the foreign companies are located in Singapore, which offers a cover to disguise the transactions as investments by domestic companies into AI ventures,” an official familiar with the investigation said.

Multiple Layers Alleged

Breaking down the suspected modus operandi, the source said the PoC generated through betting passes through several layers before reaching the offshore ecosystem.

According to the suspected modus operandi, the first layer comprises newly incorporated domestic companies through which betting proceeds are initially routed. These companies are generally floated shortly before receiving the proceeds of crime (PoC). At the next stage, the funds are transferred to overseas entities that are allegedly set up shortly before receiving the remittances. Investigators have found that both the domestic and foreign entities have dummy directors and little discernible commercial activity, with several of them subsequently becoming inactive or effectively disappearing after receiving or sending the remittances.

ODI Route Allegedly Used

The remittances are presented as Overseas Direct Investment (ODI) in foreign technology ventures, including companies claiming to operate in AI and AI solutions.

Investigators suspect that the Discounted Cash Flow (DCF) valuation method is being misused to assign artificially high valuations to companies despite their limited operating history, assets or revenue. Such valuations allegedly help give the transactions the appearance of genuine technology investments while obscuring the source and eventual destination of the funds.

‘Appearance Of Genuine Investments’

“The use of an apparently sophisticated valuation exercise lends the transactions the appearance of genuine technology investments while obscuring the origin and ultimate destination of the funds,” an official familiar with the investigation said.

The role of several company secretaries (CSs) who allegedly assisted in such DCF valuations is also under the ED scanner, sources said. The agency is likely to apprise the Reserve Bank of India (RBI) of its findings, they added.

The final stage of the suspected transaction chain involves the offshore ecosystem, where the remitted funds are allegedly routed through a network of entities before ultimately reaching the beneficiaries,the betting app promoters.

The ED’s probe into Parimatch has revealed that the platform generated more than Rs 3,000 crore from Indian users in a year. In September, the agency searched payment companies, chartered accountants and company secretaries at multiple locations across Maharashtra, Delhi-NCR, Rajasthan and Gujarat as part of its probe into the alleged laundering of betting proceeds.

The searches focused, among other things, on allegations that betting proceeds were converted into cash and moved abroad through illegal remittance channels and purported ODI transactions.

What makes the latest trail significant is the alleged attempt to borrow the credibility of one of the world’s hottest investment themes — AI — to give illicit money the appearance of legitimate corporate capital.