Karnataka HC upholds ED arrest of Cong MLA K C Veerendra in betting-linked money laundering case

New Delhi, Oct 16 (PTI) The Karnataka High Court has upheld the arrest of Chitradurga Congress MLA K C Veerendra by the ED in a betting-linked money laundering case as it dismissed a writ petition filed by his wife, seeking to declare his detention by the agency as illegal and violative of the fundamental rights.

The federal probe agency said in a statement on Thursday that the high court issued an order to this effect on Wednesday.

The ED arrested the 50-year-old legislator in August from Sikkim, where he had gone on a business trip to lease a casino. He is currently lodged in jail under judicial custody.

The MLA's wife, R D Chaitra, had stated in her petition before the high court that all police FIRs filed against Veerendra were closed or compromised and only one such complaint (No. 218/2022) remained pending.

Even this complaint, she contended, pertained to a Rs 30,000 dispute, which was treated as a civil matter and a 'B' report (closure report) was filed by the probe agency (police), as per the ED.

The ED had booked the MLA, taking cognisance of multiple police FIRs that alleged cheating through illegal online/offline betting and gambling. The agency has claimed Veerendra and associates operated illegal betting platforms such as King567 and others using payment gateways like FonePaisa Payment Solutions Pvt Ltd.

His wife told the high court in her petition that there were "no direct allegations or links to FonePaisa or betting operations against Veerendra, therefore, his arrest was without jurisdiction and violative of due process as stipulated under Section 19 of the PMLA." The ED said the HC observed in its order that there was "existence" of predicate offence satisfying the pre-condition under the PMLA (Prevention of Money Laundering Act) as proceedings under the anti-money laundering law can continue until 'B' report is judicially accepted.

"With respect to existence of proceeds of crime (POC) generated from such scheduled offence, relying on the submissions made by the ED regarding POC far beyond the scheduled offence along with perusal of the relevant extracts of reasons to believe and grounds of arrest, the High Court found the ED's justification for custodial questioning of K C Veerendra reasonable since the material on hand discloses he is involved in running of the alleged illegal betting apps, cheating people through betting apps and realising POC," the ED told the HC.

The HC observed that there was "sufficient" material in possession of the ED, which gives sufficient reasons to believe that the husband of the petitioner is guilty of an offense punishable under the PMLA, 2002.

Accordingly, the said writ petition was dismissed with liberty to file bail plea, it said.

The ED counsels argued during the hearings that the Rs 30,000 complaint was only a "tip of the iceberg" while the agency's investigation uncovered a " massive" betting racket.

"Sufficient material existed to form reason to believe under Section 19 of the PMLA for his arrest and that custodial interrogation was necessary to trace fund trails and identify foreign links," the ED told the court.

It was also argued by the agency that though the complaint pertains to only a sum of Rs 30,000, the proceeds of crime also include property not only derived or obtained from the scheduled offense, but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offense.

"On the said ground, it was contended that POC can be over and above what is mentioned in the present FIR.

"It was argued that in a cyber fraud case like the one on hand, usually complaint is given by very few persons, who are cheated and the said FIR (No.218/2022) is one such instance and the investigation into the same has made the respondent discover a large network of sophisticated criminal activity involving the luring of several persons and cheating them...," the ED informed the court.

The agency has claimed its preliminary probe found that Veerendra was the "kingpin" of a "large network" of betting and money-laundering operations, using family-run entities and overseas casinos to launder proceeds.

Funds were moved through shell companies and casinos in India, Sri Lanka, Nepal, and Dubai and the estimated proceeds of crime are worth several crores of rupees, it said. PTI NES MNK MNK