The Enforcement Directorate is set to file cases against Rajasthan Royals and the Board of Control for Cricket in India (BCCI) after its investigations found violations of foreign exchange rules, an official familiar with the development said.

The agency has completed investigations into two instances of violations and is carrying out further investigations into at least five other potential violations, as part of larger government investigations into irregularities in three editions of the Indian Premier League.

ED’s investigations have found that the cricket board violated the Foreign Exchange Management Act of 1999, when it extended a guarantee to 55 foreign players that they will be paid a fixed base price, irrespective of the outcome of the auction. The ED has examined MoUs between 55 foreign cricketers and the BCCI, which together amounted to a value of $11.5 million.

Rajasthan Royals’ owner Jaipur IPL Cricket Pvt Ltd has been found to be in violation of a May 2000 notification issued by the Reserve Bank of India as part of the Foreign Exchange Management Regulations.

The company is now being considered to have received foreign investment prior to its incorporation as overseas entities transferred the franchisee fee directly to BCCI’s account, while the team was allotted to Jaipur IPL.

Subsequently, Jaipur IPL has been trying to transfer shares to Emerging Media (IPL) Ltd and EM Sporting Holdings Ltd, and has been denied permission by both the Foreign Investment Promotion Board as well as the Reserve Bank of India.

The agency has also identified BCCI’s role as a guarantor to the facilitation fee to be paid by broadcaster Multi Screen Media to sports marketing firm World Sport Group as potentially bringing the whole transaction under the FEMA net.

While the two parties involved in the transaction—MSM Singapore and WSG Mauritius— are overseas companies, some clauses in the tri-party contracts bind BCCI into guaranteeing the payment. ET reported on 13 July that contracts were structured in a way that made BCCI a guarantor to the facilitation fee.

The ED is also investigating the financial transaction in South Africa during the second edition of the twenty-over tournament. BCCI had advanced $25,00,000 to that country’s cricket board, Cricket South Africa, for the conduct of the tournament.

BCCI has also stated to the ED that expenses incurred by the board in holding the tournament have been netted off with the income earned. Both the advance and the netting off have been identified as potentially violating Foreign Exchange Management Regulations.

The agency is investigating four IPL franchisees—Kolkata, Mumbai, Punjab and Rajasthan—that have received funds from overseas, for potential violations.

Another deal under the agency’s lens is the digital and web rights that were first awarded to Nasdaq-listed Live Current Media and subsequently, at a much lower price, to Global Cricket Ventures Pvt. Ltd. BCCI-IPL entered into a deal with Live Current Media in April 2008 for $49 million, according to information with the ED.

Subsequently, in March 2009, the cricket league terminated its contract with Live Current Media and awarded the same contract to Singapore-based Global Cricket Ventures for $20.75 million, less than half the original value.

Subsequently, GCV entered into a joint venture with Dubai-based Netlink Blue Holdings, which already owned mobile rights. Further, GCV Singapore transferred the rights to a newly created Mauritius-based company for just $1.75 million.

ED has concluded that the whole deal is opaque and the ultimate beneficiaries of the deal need to be identified.

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