Free Fire money laundering case: Coda Payments, frozen bank accounts and all you need to know

One of the most popular mobile games, Free Fire, has been embroiled in controversy yet again with the Enforcement Directorate raiding Coda Payments' offices in India following a money laundering probe. The Enforcement Directorate's move was related to ongoing investigations, including Coda Payments and Free Fire.

The search took place on September 27 at Coda Payments India Pvt Ltd premises and resulted in the company's bank accounts being frozen. Details revealed that the accounts had a balance of around ₹68.53 crores. The raid was in response to multiple FIRs filed against Coda Payments India Pvt Ltd and Garena's battle royale game.

In the following section, readers can learn more about the case and the actions taken against Coda Payments.

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ED raids Coda Payments and freezes bank accounts in an investigation on the company alongside Garena Free Fire

A screengrab of Press Release (Image via ED)

An official press release from the Enforcement Directorate investigated Coda Payments and Garena Free Fire under the Prevention of Money Laundering Act (PMLA), 2002. The raids on Coda Payments India Pvt. Ltd were in connection with the same investigation.

The press release further revealed that the raids were conducted at three premises related to Coda Payments India Pvt Ltd. Furthermore, the Enforcement Directorate froze all bank accounts (balance of ₹68.53 crores as on September 27), merchant IDs in payment gateways, and fixed deposits belonging to the company under the PMLA, 2002.

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What was the basis of the investigation against Coda Payments and Free Fire?

The Enforcement Directorate also revealed that the investigation was based on multiple FIRs filed against both Coda Payments and Garena's BR shooter. The FIRs were related to allegations of unauthorized deductions made by Coda Payments on their website whenever users purchased virtual in-game tokens.

In its press release, the Enforcement Directorate alleged,

"in the name of monetising and generating revenue for web/game publishers, is resorting to unauthorized deductions from the end users (mostly unsuspecting children) of these games in the name of selling digital tokens to end users which are used by the end users to enhance their playing experience in the game."

The press release also mentions an unethical payment mechanism that is specifically designed to attract more transactions from end users. The Enforcement Directorate further alleged the involvement of Garena's battle royale game in such transactions.

According to the press release, the Enforcement Directorate further adds,

"Game developers like Garena and M/s Coda Payments India Pvt Ltd have intentionally designed the payment mechanism in such a way that after first successful transaction, a notification pops-up which seeks permission to make subsequent payments without any authentication."

Since the majority of the end users are children,

"They 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. Garena which publishes 'Free Fire' does not have a company or presence in India and is operated from Singapore."

Following the investigation, the Enforcement Directorate found that Coda Payments' India branch was a mere agent of Coda Payments Singapore Pte. Ltd.

Coda Payments India Pvt. Ltd. remitted almost all of the payments collected by it to the parent company in Singapore.

Here's what the press release revealed about the total amount of money remitted to Coda Payments Singapore Pte. Ltd.,

"Till date the amount collected by CPIPL is Rs. 2850 Crore, out of which, Rs. 2265 Crore has been remitted outside India after retaining certain percentage of revenue for payment of taxes and nominal profits."

Therefore, to seize further transactions made by Coda Payments, the Enforcement Directorate has frozen its bank accounts, as mentioned earlier.