Macau group shares drop after CEO arrest over 'illegal live web betting platform' in PH

Eduardo Baptista, Reuters

Posted at Nov 30 2021 05:30 PM | Updated as of Nov 30 2021 08:36 PM

A logo of Macau junket operator Suncity Group is seen at a gaming fair in Macau, China November 18, 2015. Bobby Yip, Reuters/File
A logo of Macau junket operator Suncity Group is seen at a gaming fair in Macau, China November 18, 2015. Bobby Yip, Reuters/File

HONG KONG (UPDATE) - The arrest of Macau's junket mogul is expected to shrink business in the world's largest gambling hub, with authorities in China this week underlining their intent to crack down on what they see as a dangerous outflow of funds from the mainland.

Alvin Chau, the CEO of gambling group Suncity Group Holdings Ltd and founder of the biggest of Macau's junket operators that bring in high rollers to play at casinos, was arrested on Sunday by Macau authorities over alleged links to cross-border gambling. A warrant for his arrest has also been issued in China.

His arrest, analysts say, has ushered in a new era - one of zero tolerance towards the promotion of gambling in mainland China where all forms of gambling are illegal. It has also dealt a heavy blow to the junket industry, that will further erode Macau's reliance on high rollers and accelerate an industry shift to the mass market.

The crackdown on Suncity has direct implications for casino marketing staff, who do similar work to junkets in promoting Macau gambling to clients in mainland China.

"After this, now they know that arranging players to come to Macau, promoting gambling in China, even if it’s a phone call in China, could land them in hot soup," said Ben Lee, founder of Macau gaming consultancy IGamiX.

Cross-border flows of money due to gambling have long irked the Chinese government, and Macau authorities said their investigation has been in train for two years.

Carlos Lobo, a Macau-based gambling consultant, said the crackdown - which comes amid broad regulatory efforts by Beijing to rein in a range of sectors - had only been a matter of time after China ruled in July of last year that cross-border fund flows due to gambling were a national security risk.

Underscoring the new tougher stance, Miao Shengming, an official with China's top prosecutorial agency, told a news conference on Monday that some overseas casinos and online gambling websites primarily target mainland clients, harming China's "economic security".

JUNKET PAIN

Chau's junket operations, by some estimates, account for roughly one quarter of Macau's gaming revenues.

The damage to those junket operations likely spells further earnings declines for casino operators, already reeling since the onset of the pandemic as China's quarantine requirements have made it too costly for most mainland tourists to travel to Macau. Macau logged 4.4 billion patacas ($550 million) in gambling revenue in October, down 40% from a year earlier.

Macau-listed units of U.S. casino operators have plunged in the past two days, with shares in MGM China slumping 15%, Wynn Macau tumbling 11% and Sands China falling 9%.

Macau authorities accused Chau and 10 others of using the former Portuguese colony as a base for an illegal "live web betting platform" in the Philippines that attracted mainland Chinese.

Authorities in the eastern Chinese city of Wenzhou have separately accused Chau of forming a junket agent network that helps citizens engage in offshore and cross-border gambling activities and setting up a company that helps gamblers make cross-border fund transfers.

Suncity Group - which has a broad range of interests in the gambling sector but does not include Chau's junket operations - said Chau, who is both CEO and chairman, intended to resign.

Its stock plunged 48% on Tuesday to a record low after being suspended from trade a day earlier, valuing it at HK$880 million ($113 million). Suncity said its operations would not be impacted in the event that it ceased to have Chau's support.

Part of the Macau investigation involves Russia's Tigre de Cristal resort which is close to China's northeast border and is controlled by Summit Ascent Holdings which in turn counts Suncity as its controlling shareholder. Shares in Summit Ascent slid 63%.

Suncity Group said allegations in the media that Tigre de Cristal was involved in cross-border gaming because it had solicited customers in mainland China were untrue.

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