In a massive procedural setback for the Enforcement Directorate (ED), the Karnataka High Court has declared the arrest of Gameskraft’s three founders illegal and ordered their immediate release from prison.

Justice M. Nagaprasanna allowed the writ petitions filed by the founders—Deepak Singh, Prithvi Raj Singh, and Vikas Taneja—ruling that the central agency’s aggressive actions were “contrary to law” and completely bypassed mandatory statutory protections.

The Core Ruling: Why the High Court Intervened

The High Court’s decision to strike down the arrests hinges heavily on procedural failures by the ED under Section 19 of the Prevention of Money Laundering Act (PMLA).

Senior counsel representing the founders argued that the ED’s move was entirely pre-determined. The agency initiated searches at the founders’ Gurgaon residences on May 7, concluding them on May 8. However, defense teams proved that the “grounds of arrest” and internal log entries were recorded before the search operations were actually finished.

The court emphasized that Section 19 strictly requires an officer to form a “reason to believe” based on real-time material gathered during the investigation, rather than operating on a pre-planned script to bypass existing legal stays.

Anatomy of the ED’s Laundering Allegations

The ED’s Enforcement Case Information Report (ECIR) stems from three separate First Information Reports (FIRs) filed by the Telangana Police. While the founders have secured temporary liberty regarding their arrest, the central agency’s broader investigation highlights severe operational allegations:

• The Bot Manipulation Claim: The ED alleges that Gameskraft (which operates popular platforms like RummyCulture and RummyTime) falsely promised bot-free, transparent gameplay. Instead, the agency claims the platform deployed automated bot accounts to beat real users, causing collective player losses of ₹1,154 crore.
• The “Lure and Lock” Scheme: The probe agency stated that new users were systematically allowed to win small amounts in low-stakes games to build false confidence, inducing them to deposit significantly larger sums before facing abrupt, algorithm-driven losses or locked accounts.
• Capital Diversion: The agency accused the founders, alongside former CFO Ramesh Prabhu, of actively diverting and laundering ₹250 crore out of the company under the guise of personal investments in mutual funds and high-risk futures and options (F&O) trading.

A High-Stakes Battleground for Real-Money Gaming

The High Court’s intervention marks the latest chapter in Gameskraft’s ongoing, high-profile friction with government enforcement bodies.

The defense teams noted that the ED’s recent moves appeared to be an attempt to circumvent an earlier Karnataka High Court stay order from January, which had frozen a separate ED probe after local police filed a closure report on a previous predicate offense. The court’s blistering ruling forces the ED back to the drawing board, reminding the agency that even under stringent anti-money laundering laws, statutory safeguards and citizen liberties cannot be sidelined for administrative expediency.