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Jailed Macau Junket King Likely to Lose Russian Empire
Alvin Chau’s arrest dashes Vladivostok’s hopes of luring Chinese gamblers
By: Toh Han Shih
China’s aggressive crackdown on the notorious outfits that bring high-rolling gamblers including corrupt government officials to Macau VIP rooms has netted Alvin Chau, the now-jailed king of Macao’s junket operations, who appears likely to lose his gambling empire including his casino on the outskirts of Vladivostok, likely putting paid to Vladivostok’s hopes of becoming a Mecca for Chinese gamblers.
Chau, who commands most of Macau’s junket operations, was arrested in late November and now faces a strong chance of losing control of two Hong Kong-listed companies, Suncity Group Holdings and Summit Ascent Holdings, after he defaulted on debt. As a result, VIP gaming revenues in Macau will decline by 80 to 90 percent in the short term, observers say.
“The junket model as we know it is officially dead forever,” Eric Coskun, director of casino projects at IGamix Management & Consulting, a Macau-based consultancy, told Asia Sentinel. “The junkets, if they want to survive, need to reinvent themselves into more of a travel agent role similar to the casual junkets in Southeast Asia. VIP revenues will never recover significantly.”
If Chau loses control of the companies, he will likely be forced to forfeit Tigre de Cristal (above), a casino in the Primorye Integrated Entertainment Zone, which lies 50 kilometers from Vladivostok and is one of the four areas in Russia where gaming is permitted. Chau wholly owns Suncity, which owns 70 percent of Summit Ascent, which in turn owns 77.5 percent of Tigre de Cristal.
Junket operators act as middlemen who bring punters who typically gamble hundreds of thousands of US dollars per day to VIP rooms in casinos. Chinese authorities, with the help of their Macau counterparts, have been cracking down on junkets to curb capital flight and money laundering out of mainland China.
Suncity Group controls most of Macau’s VIP gross gaming revenue (GGR). Chau’s junket operations are conducted by his company Sun City Gaming Promotion Company, which ceased operations on December 1, according to media reports. Given Chau has wrapped up all his junket business in Macau, VIP revenues in this city will decline by 80 to 90 percent in the short term, Coskun predicted.
On December 12, Suncity announced that another company wholly owned by Chau defaulted on a debt of HK$300 million (US$38.5 million). If the creditors exercise their rights, 74.9 percent of Suncity will be sold to new owners, Suncity said. Since Suncity owns 70 percent of Summit Ascent, if the majority stake in Suncity is sold, Summit Ascent as well as its Russian casino Tigre de Cristal will also be sold.
As Asia Sentinel reported in August of 2020, the government in Beijing has grown increasingly irritated over the massive amounts of illegal funds flowing into gambling outside the country through online gaming and video streaming as well as gambling meccas, and launched a series of crackdowns. In June of 2020, the Ministry of Public Security announced the arrest of more than 11,500 suspects, said it had destroyed 368 gambling platforms and 148 technical programs and seized more than US$32 billion.
On November 27, the Macau Judiciary Police announced the arrest of the ringleader of a criminal syndicate, apparently Chau although he wasn’t named, and 10 backbone members of that syndicate, the police announced on the same day.
“In August 2019, the Judiciary Police learnt, by collecting intelligence, that a criminal syndicate had been exploiting its VIP junket business in Macau casinos to recruit mainland Chinese residents to engage in illegal online gambling by launching online gambling platforms overseas. The illegal proceeds of the syndicate were then laundered and transferred through the junket accounts of Macau casinos by means of illegal channels such as underground banks,” the police added.
Summit Ascent announced on November 29 that Chau had been arrested by the Macau Judiciary Police with the approval of the People’s Procuratorate of Wenzhou city in Zhejiang. Chau resigned as chairman of Summit Ascent and Suncity on December 1, both companies announced around the same time.
On October 27, the Department of Public Security of Jilin Province announced it discovered on July 22 that a syndicate illegally brought Chinese citizens to gamble in the Tigre de Cristal casino as part of a cross-border gambling racket. Since the Tigre de Cristal opened in October 2015, this criminal syndicate has been bringing Chinese citizens to gamble in VIP rooms, the public security department revealed.
Together with the Department of Public Security of Heilongjiang Province, the Jilin Public Security Department busted a gambling operation which involved RMB1.6 billion (US$251 million), 18 shell companies, four underground banks and 10 travel agencies, the Jilin public security department said. The department added that 142 people had been arrested and 75 people charged, including one casino manager.
Going forward, Jilin province will severely crackdown on cross-border gambling and “resolutely break the chain of gambling funds and technology chain,” the Jilin Public Security Department said.
“This crackdown will pretty much eliminate the majority of the business in Vladivostok and other jurisdictions looking to attract Chinese players,” IGamix’s Coskun said.
Over half of Tigre de Crystal’s business comes from Chinese VIP gamblers, while the only other operational casino in the Primorye zone, Shambala, caters mostly to local players, Coskun said. The Primorye zone has plans for 12 casinos but only two are open, Coskun pointed out. Two more casinos are scheduled to open next year, including a US$300 million casino being built by Nagacorp, another Hong Kong-listed casino operator.
On May 23, 2012, the Moscow Times quoted Marina Lomakina, general director of Nash Dom Primorye, a company owned by the local government of Pimorye, saying, "We hope most of the customers will be from China, as well as Korea, Japan, and the United States. We have very strong ties with these countries and expect to have their interest."
Even before the punitive measures related to Suncity and Chau over the past several months, there were misgivings about the firm. On March 23 last year, Suncity announced Eric Daniel Landheer resigned on the same day. In his resignation notice to the company, Landheer disagreed with Suncity’s board of directors on the company’s future investment plan, its business development and timetable and its corporate governance related to future and potential plans, according to Suncity’s announcement.
China has capital controls but they have been easily broken by junket operators who provide gambling in Russia and facilitate connections in China, said a Hong Kong-based investigator.
“Vladivostok is readily accessible to Chinese and when funds flow out of China they may not return back unless they are laundered back and fuel the corruption and social instability that the government fears the most,” said the investigator, who declined to be named.
Unregulated gambling is a great method to launder illicit funds, the investigator added. “When you are a major junket operator you quickly gain leverage of people who cannot pay their debts. This is a threat to the legitimacy of the CCP (Chinese Communist Party) regime. If an increasing number of citizens, some of whom are members of the CCP, are indebted to Alvin Chau that means their loyalty is not to the CCP but rather to Alvin Chau.”
Notwithstanding Chau’s arrest, many will try to replace him, the investigator predicted.
Toh Han Shih is the chief analyst of Headland Intelligence, a Hong Kong risk consultancy.