Enforcement Actions Impacting India’s Startup Ecosystem in 2025

In 2025, the Enforcement Directorate (ED) intensified its enforcement efforts within India’s startup landscape, shifting focus from sector-specific investigations to direct operational interventions. Initiating with online gaming, the scrutiny expanded throughout the year to include fintech, e-commerce, and cross-border trading platforms. At least eight companies originating from startups faced actions from the ED. The repercussions frequently went beyond mere notices and investigations to include account freezes, litigation, operational disruptions, and, in some instances, complete business closures.

Probo: Enforcement Action and Shutdown

The opinion trading platform Probo became one of the most notable cases during this period. In July, the ED conducted searches across multiple locations and confiscated assets valued at Rs 284 crore, claiming Probo’s operations aligned with illegal betting as per the Prevention of Money Laundering Act (PMLA). Probo contested the FIR in the Punjab and Haryana High Court, seeking relief for its frozen bank accounts. With no interim relief granted and funds remaining inaccessible amidst wider regulatory challenges in gaming, the company discontinued its operations.

WinZO: Founders Arrested in PMLA Gaming Probe

The online gaming startup WinZO encountered significant enforcement actions. The ED initiated a PMLA investigation due to user complaints and FIRs alleging manipulation of outcomes, restrictions on withdrawals, and persistent real-money gaming activities. During submissions to the Karnataka High Court, the ED referenced 298 complaints and five FIRs. This led to the freezing of bank and escrow accounts, disturbing operations. The founders found themselves in judicial custody, with the company confirming that everyday business activities were hindered.

Gameskraft (Pocket52): Account Freezes

The ED also targeted Gameskraft, which manages platforms such as Pocket52. In 2025, the agency froze deposits and escrow accounts, citing worries over fund flows and refunds following the imposition of regulatory restrictions. Gameskraft asserted that its offerings are games of skill, compliant with relevant laws. The issue remains under legal examination.

Dream11: Searches Linked to Legacy Transactions

The fantasy sports platform Dream11 fell under ED scrutiny with searches conducted at over 25 locations, including sites linked to co-founder Bhavit Sheth. This enforcement action is part of a Rs 2,434 crore money laundering inquiry related to Jai Corp and associated entities. The ED is investigating historical financial connections involving Dream Sports, although no direct operational allegations have been levelled against Dream11.

Myntra: FDI Compliance Case

The fashion e-commerce platform Myntra faced proceedings from the ED over alleged foreign direct investment (FDI) violations totalling Rs 1,654 crore. The agency alleged misuse of the wholesale cash-and-carry structure through transactions with the group entity Vector E-Commerce. This case is pending review by the ED’s adjudicating authority in Bengaluru.

Simpl: Fintech Classification Issue

The buy-now-pay-later startup Simpl faced ED actions concerning alleged FDI violations amounting to Rs 913 crore. The agency claimed that foreign capital was raised via the automatic route by misclassifying the business as IT services, despite its offerings closely resembling regulated financial services. Operations continue as the matter unfolds.

Paytm: FEMA Notices

Fintech firm Paytm, along with its subsidiaries Little Internet and Nearbuy, received show-cause notices regarding alleged FEMA violations worth Rs 611 crore. These notices pertain to overseas investments made between 2015 and 2019, prior to Paytm’s acquisition of these entities. The company indicated that the issues occurred before its ownership.

OctaFX: Cross-Border Trading Investigation

The global trading platform OctaFX was investigated under PMLA for purportedly unauthorized operations in India. The ED alleged that investors suffered losses of nearly Rs 1,875 crore between 2022 and 2023. As part of this investigation, the agency attached cryptocurrency assets and overseas properties associated with Pavel Prozorov, who was taken into custody in Spain. Chargesheets have been filed.

These enforcement actions underscore a broader shift in 2025, bringing about active regulation that impacts startup operations. For founders and investors alike, compliance with FDI structures, escrow management, fund flows, and business classification has emerged as a vital operational focus, in addition to market and execution risks.