One of the biggest online casino operators in Ukraine is facing charges after it was allegedly involved in a complex scheme to lower its tax liability.

The government of Ukraine claims in a statement released by the Economic Security Bureau that Cosmolot, an online platform that offers interactive casino games like slots, table games with live dealers, and lotteries, intentionally concealed earnings to avoid having to pay taxes on the profits.

The Bureau of Economic Security's investigators came to the conclusion that Cosmolot employed over thirty "mirror sites" with interfaces resembling its licensed platform. Prosecutors claim that the gaming proceeds from those fake websites were transferred to different 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. 

Money Taken

According to the Economic Security Bureau of Ukraine, money from Cosmolot's bank accounts was taken while the government pursued legal action. According to the press announcement, Ukraine stole UAH700 million, or US$18.64 million, from the operator of the iGaming.

The office of Ukraine Prosecutor General Andriy Kostin is in charge of the current case. The Cosmolot platform was still in use on Thursday afternoon.

The tax rate on internet casinos was raised by the Ukrainian government from 10% to 18% last year.

Alongside the tax increase came a new anti-money laundering regulation aimed at limiting the amount of money that a criminal might launder online. Additionally, KRAIL, the national gaming regulator of Ukraine, has the authority to carry out surprise financial audits of its licensed firms. 

The Russian invasion in February 2022 prompted the iGaming crackdown. KRAIL mandated that internet casino companies cease providing their gambling products to Russia or Russian-occupied Ukrainian territory during the conflict, as authorized by Ukrainian government officials.

KRAIL made the 1xBet websites with Russian connections stop operating in Ukraine in 2022. After learning that 1xBet's parent firm, TBK LLC, advertised a pornographic website, accepted bets on children's sports, and violated financial compliance, KRAIL revoked the company's gaming license in September 2022.

Cosmolot refutes the accusations

In a statement, Cosmolot said that the accusations were unfounded. To avoid paying taxes, the iGaming company denied assigning staff members to manage gambling platforms using mirror websites. 

"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 claims that the copied websites are the work of a criminal network that is keeping the money for itself. Cosmolot's online casino license is in jeopardy in the event that it is proven guilty. Millions of fines might also be imposed on the company.

Prior to President Viktor Yushchenko's signing of legislation legalizing casinos and online gaming in 2020, gambling was prohibited in Ukraine.

Only areas specifically allocated for gaming are permitted to house casinos. Casinos are only allowed to be found inside "cultural or entertainment complexes" or four- or five-star hotels with at least 100 guestrooms.