IESF esports scandal - millions of taxpayer dollars going to nowhere
International esports federation is embroiled in a scandal involving financial fraud surrounding their annual World Championship, which is to be held in Romania. The investigation was published by portal Reporteris. The attention of the Ukrainian community was drawn to the situation by StarLadder Director of Strategic Partnerships Andrey Yatsenko.
What is the IESF?
International Esports Federation (IESF) is an international sports organization whose mission is to make eSports legal worldwide. It unites national cybersports organizations of most countries. The company was founded in 2008 and is headquartered in Seoul and is on the books of the South Korean Ministry of Culture, Sports and Tourism.
When will IESF 2023 take place?
IESF World CyberSport Championship 2023 will be held from August 25 to September 3 in Iasi, Romania. The event will include tournaments in CS:GO, Dota 2 and other disciplines. The prize fund for each championship is $ 100 thousand.
The essence of the scandal
To get the right to hold the World Cyber Sports Championship, the tournament operator has to buy a license, in this case for a million dollars. Holding this competition has a number of advantages and benefits for the host city, from the growth of tourism and the economy to global advertising.
According to the portal Reporteris, the Municipal Sports Club (CSM) of Iasi, will pay a license fee of one million dollars for the right to host IESF 2023. Of this amount, the CSM has already paid $750 thousand, but not to the account of the Ministry of Culture, Sports and Tourism of South Korea (MCST), which is the owner and the main financial donor of the IESF. The money was transferred to the account of a local company in Northern Macedonia, allegedly a subsidiary of the IESF. Moreover, the company itself was founded by IESF President Vlad Marinescu seven weeks before the first payment
South Korea has already launched its own investigation into the matter, as the money for the license should have been paid into the IESF account in South Korea and not into the account of the subsidiary in North Macedonia.
According to Vladimir Danilov, director of the Municipal Sports Club of Iasi KP, they could not pay directly to the account in South Korea, so they asked IESF for bank details in a European Union country and they were sent an official letter asking them to pay to a bank in North Macedonia. According to him, he did not know that the subsidiary had only recently been founded. Moreover, the official correspondence specifies the request for the bank's details from the EU, while North Macedonia is not part of the EU.
The beneficiary of the IESF regional office in North Macedonia is the notorious Boban Totovski. It was he, along with Marinescu, who persuaded Danilov to transfer $750,000 to the Skopje account. Totovski himself has a bad reputation among the eSports community.
Yes, several of my sources have confirmed not infrequent cases of fraud, when tournaments associated with this man or organizations he heads did not pay the prize money. In particular, we are talking about Skopje CS:GO Masters 2012 tournament, the champion of which was the current COO of Natus Vincere - Alexei Kucherov. He hasn't received his prize money for the first place so far. Also, no money was paid for another international Dota 2 tournament in 2016: then the organizers said that they lost their sponsors and spent all the money on humanitarian aid for the victims of the flood in Skopje, which happened that year.
When reporters asked Marinescu why the money ended up in the North Macedonian branch of the IESF and what was the purpose of the money, he said:
The IESF is an officially registered organization headquartered in South Korea and legally located in North Macedonia, and as a unified organization that can receive payments at its offices, the payment from the Municipal Sports Club [Iasi] was transferred to the North Macedonian office. The money was allocated to the IESF budget, which is approved by the members of the Council and reported annually to the General Assembly for the approval of the National Federations that are members. The IESF, as the tournament organizer, employs full-time professional staff both at our headquarters in South Korea and at our office in North Macedonia, who work tirelessly for our operations and the main event that is the World Championship.
To the request of IESF Korea board members Marinescu already gave a different answer. Part of these funds will be used to cover prize money from the 2022 World Championships. Such budgetary mathematics raises many questions. It will be clear to anyone that it is impossible to refinance the prize fund of one budget at the expense of the next. Where did the money from the IESF 2022 prize fund go?
There is no limit to financial fraud
The total amount to be allocated by Iasi City Hall for the event will be €5 million. According to Reporteris portal, the total budget of the event is €7.3 million. Of course, not all this amount will be used for IESF 2023 finals, but the sum of €3.68 million is not less impressive and will be distributed as follows:
- €1.22 million for logistics (€560 thousand for air tickets, €392 thousand for hotels, €240 thousand for catering, €31 thousand for transport);
- €400 000 - rent of the ground;
- €551,000 - production;
- €56,000 daily allowance for judges and commentators;
- €500 000 - prize money;
- €350,000 for additional demo games and regional competitions.
This is some exorbitant and fantastic sums for holding an event, the level of the IESF World Championship. Although I'm not an IESF level expert and I'm not even one of the Municipal Sports Club of Iasi organizers, but as a direct organizer of tournaments like World of Tanks Grand Finals 2017, Rainbow Six Invitational Montreal 2018, IEM Katowice, Berlin CS:GO Major 2019 and understanding other global tournaments budgets, I can say with confidence that such amounts are inadequate.
The biggest curiosity is not even the budget of the event itself, but the fact that most of these funds under the contract should be paid by the municipality of Iasi at the expense of the municipal budget (i.e. at the expense of taxpayers). Do the people of Iasi really want to see in their city such a large-scale urban event as the World Championship from IESF? The question is rhetorical.
In order to be properly registered, the establishment of a subsidiary must have proof. But this has not been done. In fact, there is only one IESF located in South Korea. The company from North Macedonia is a sham, something illegal. Sending payments from Romania directly to North Macedonia was a violation of the law. The money had to go through the headquarters in South Korea in order to get to North Macedonia. Thus, the investigation initiated by representatives of the South Korean office of the IESF should expose the scheme and its participants, and the perpetrators should be punished.