PhonePe entangled in money laundering probe involving Winzo Games, received ED summons

PhonePe, a prominent digital payments firm, has found itself embroiled in a money laundering inquiry that also involves Winzo Games and various other entities. This revelation surfaced in the company's updated draft red herring prospectus (UDRHP), as reported by The Economic Times. The Enforcement Directorate (ED) has reportedly contacted PhonePe several times between late 2025 and 2026, seeking transaction and settlement records connected to Winzo Games and Tictok Skill Games. This investigation, spearheaded by the ED’s Bengaluru office, is part of a larger effort to enforce the Prevention of Money Laundering Act (PMLA). Furthermore, PhonePe disclosed that it received summonses from ED offices in Mumbai and Delhi from June 2024 to April 2025. These were related to inquiries involving third-party merchants, including Sutrulla Express and Dinero Payment Services. In its submission to the Securities and Exchange Board of India (Sebi), PhonePe clarified that the inquiries are focused solely on these third-party vendors and stressed that neither Winzo nor Tictok has any ties to PhonePe's executives or management. A company spokesperson affirmed to The Economic Times that the summons do not pertain to any investigation of PhonePe or its directors. They stated, "Our limited role is that of a third-party information provider aiding the investigation in accordance with the law." This situation follows a setback for PhonePe in May 2025, when the Karnataka High Court dismissed its attempt to avoid disclosing customer and transaction information to regulatory bodies. The court ruled in favor of transparency, emphasizing that payment companies must cooperate during criminal investigations. The incident underscores the escalating regulatory scrutiny faced by major payment platforms in India, including competitors like Paytm and Razorpay, which have also been implicated in investigations concerning fraudulent merchants and illegal activities. In response to these challenges, the Reserve Bank of India (RBI) tightened Know Your Customer (KYC) regulations and imposed stricter due diligence requirements on payment intermediaries in September 2025. Despite these hurdles, PhonePe has proceeded with its plans for a $1.5 billion initial public offering (IPO), which comes after receiving preliminary clearances from Sebi. The IPO is projected to value the company at around $15 billion.