Ukraine Seizes Almost $19M From iGaming Firm Accused of Tax Evasion

Posted on: February 8, 2024, 11:59h. 

Last updated on: February 8, 2024, 12:09h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

Ukraine is prosecuting one of its largest online casino operators on allegations that the company orchestrated a comprehensive scheme to reduce its tax bill.

Ukraine iGaming online casino website
Ukraine has seized almost $19 million from an online gaming platform accused of tax evasion. The country also alleges the iGaming firm used mirror websites to conceal its criminal activity. (Image: Pixlr)

In a statement from Ukraine’s Economic Security Bureau, the government alleges that Cosmolot, an online platform that runs interactive casino games, including slots, live dealer table games, and lotteries, purposely hid revenue to avoid paying taxes on the income.

Investigators with the Bureau of Economic Security concluded that Cosmolot used more than 30 “mirror sites” that had similar interfaces as its licensed platform. Gaming revenue from those website clones, prosecutors say, was directed to separate bank accounts.

The government release on the probe said Cosmolot tasked a group of employees to run the unlicensed online gaming websites.

It was also established that the gambling licensee was not located at the address specified in the license,” the notice explained. “And its officials deliberately concealed evidence — documents and other information necessary for a comprehensive, complete, and impartial investigation of the circumstances of the crime.”

Cosmolot is based in Ukraine but has US and UK-based investors, the company’s LinkedIn profile says.

Funds Seized

Ukraine’s Economic Security Bureau says it seized funds from Cosmolot’s banking accounts as the government’s prosecution continues. The news release said Ukraine took UAH700 million (US$18.64 million) from the iGaming operator.

The ongoing case is being led by Ukraine Prosecutor General Andriy Kostin’s office. As of Thursday afternoon, the Cosmolot platform was still operating.

Last year, Ukraine increased tax rates on online casino firms from 10% to 18%.

The tax hike was accompanied by a new anti-money laundering law designed to restrict a criminal’s ability to launder money online. KRAIL — Ukraine’s national gaming regulator — was additionally authorized to conduct unannounced financial inspections of its licensed operators.

The iGaming crackdown came in the wake of Russia’s invasion in February 2022. Ukraine government officials directed KRAIL mandate that online casino operators stop offering their gaming products to Russia or Russian-occupied Ukrainian territories during the war.

In 2022, KRAIL forced the Russian-linked 1xBet websites to cease operations in Ukraine. KRAIL canceled the gaming license for 1xBet parent, TBK LLC, in September 2022 after determining that the company allowed bets on children’s sports, promoted a pornographic website, and ran afoul of financial compliance.

Cosmolot Denies Allegations

Cosmolot said in a statement that the charges are baseless. The iGaming firm denied appointing employees to run mirror website gaming platforms to evade taxes.

Cosmolot employees are involved only in the maintenance and support of the official website, cosmolot.ua, which operates exclusively on the basis of an official license,” the company stated.

Cosmolot contends that a criminal network is behind the cloned websites and is pocketing the revenue. If Cosmolot is found guilty, the company’s online casino license is at risk. The firm could also be on the hook for millions in fines.

Gambling was illegal in Ukraine until 2020 when President Viktor Yushchenko signed legislation allowing casinos and online gaming.

Casinos are only allowed in specially designated gaming zones. Casinos must be located inside a hotel with a rating of four or five stars that offers a minimum of 100 guestrooms or inside a “cultural or entertainment complex.”