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Macau gaming mogul and Suncity junket boss Alvin Chau and ten other suspects have been detained or questioned in Macau after the issuance of an arrest warrant for Chau in mainland China.
The arrest warrant and Chau’s detention on Saturday have triggered arguably the worst crisis for Macau’s VIP gaming segment in its history.
Ramifications are likely to unfold for Suncity casino and VIP operations throughout Asia, Macau’s wider junket and casino environment, and even Macau’s fiscal stability, analysts and experts warn.
David Green, the Melbourne-based principal of gaming consultancy Newpage Consulting and a former long-time adviser to the Macau government, said the junket segment is facing oblivion, at least involving China-sourced business.
But the impact on the wider Macau economy could also be profound, he said, despite years of withering revenue and loss of share to the mass and premium mass markets.
“A successful prosecution of Alvin Chau and other Suncity executives would likely spell the end for China-facing junket promoters,” Green told VIXIO GamblingCompliance on Monday
“This could present [Macau’s government] with budgetary issues, and see unemployment rise to levels not seen since the early 2000s.
“The second 25 years of the Macau Special Autonomous Region is likely to be very different to the first 25,” he said.
Chau was taken into custody with his fellow suspects over alleged ties to a “criminal gang” engaging in “illegal gambling” activities and money laundering, Macau’s Judicial Police said in a Sunday press conference.
The police also reported seizing 3m patacas ($385,000) in cash and a small number of computers, documents and cellphones. None of the suspects were fully named, per Macau custom.
The detentions came only hours after Wenzhou City prosecutors in mainland China’s Zhejiang Province issued an arrest warrant for Chau in an apparently separate probe.
In a statement released on social media late Friday, the Wenzhou City Public Security Bureau named Chau as the head of a suspected criminal organisation involved in cross-border gambling and gambling operations in mainland China.
The statement named Chau as a resident of Macau and the sole shareholder and chairman of the Suncity junket, but did not refer to his reported Portuguese nationality.
It accused Chau of establishing a complex network of at least 199 investor agents and more than 12,000 ordinary agents that moved “enormous” amounts of money and solicited some 80,000 gamblers to travel to overseas casinos.
Chau “established asset management companies within Chinese borders, offered services to customers for the exchange of assets for gaming chips, assisted in the recovery of gambling debt, and helped customers redeem cash from assets in cross-border transactions,” the statement said.
It said Chau used underground banks — a sector for which Wenzhou has become notorious — as clearing houses for customer accounts.
Chau’s alleged operations “seriously harmed the administrative order of our society”, it said.
Macau police said their probe is ongoing and it is investigating other individuals, adding that the investigation into Chau began in August 2019, without saying what started the probe.
But it was not clear to what extent, if any, the Macau and Wenzhou authorities cooperated, or what will come of the Wenzhou arrest warrant in view of a possible custodial sentence in Macau.
The Macau probe purportedly began only weeks after publication of a mainland Chinese state-run media exposé into Suncity and Chau that alleged Suncity generated more than $145bn annually in illegal online gaming turnover.
That month also coincided with a report that the Australian government had declared Chau persona non grata over Suncity operations in Australian casino VIP rooms.
Chau’s arrest climaxes a series of increasingly damaging policy, market and legal difficulties that have constrained or suffocated junket activity, financing and confidence.
These body blows to the junkets included increasingly disruptive regulatory reform, signals for tighter legislation for the next round of casino concessions, ongoing pandemic uncertainty and travel disruption and a new court ruling that operator Wynn Macau be held financially accountable for a heist at the former Dore junket’s VIP room.
Green said the arrests are “bad news for all junket operators, given the prominence of Suncity and its strenuous efforts to forward integrate into casino operations” in resorts in Vietnam, the Philippines and Vladivostok, among other places.
“I suspect the Macau administration will tighten regulation further as well, and that may make junkets unattractive both for their people and for the casino concessionaires, especially post-Dore.
“Premium mass is likely short-term collateral damage. Longer-term, it is likely the future of the industry in Macau,” he said.
However, the elimination of junkets strips casino operators of the risk-absorbing middle man operations that turbo-charged Macau’s growth into a gaming leviathan.
With the junkets’ demise and Beijing’s relentless attacks on VIP gambling, the risk profile for casino operators will increase substantially for larger players, even in the premium mass segment, Green said.
“I suspect the operators will be loath to advance credit to mainland players, not just because of the collection risk; there will always be concerns about sources of funds/money laundering/capital controls.
“The reduction in credit availability will certainly depress both the size and velocity of premium player losses,” he added.
However, some analysts continue to see upside in the chain of damaging incidents that have devastated the VIP segment over recent years.
“For Macau, the future remains in mass and premium mass recovery,” Bernstein analysts led by Vitaly Umansky wrote on Monday.
“A shrinking junket business, especially junkets with ties to overseas gambling and illicit online gambling, is good for the stability and future opportunity in Macau.”
Casino stocks in Hong Kong, already reeling on Friday over the possibly highly infectious Omicron variant of the COVID-19 coronavirus, fell heavily again on Monday.
Shares for the “big six” casinos in Macau were down between 5.5 percent (Sands China) and 10.3 percent (MGM China) at 2:45pm.
Suncity Group Holdings and the Chau-controlled Summit Ascent Holdings, which operates the Tigre de Cristal casino hotel near Vladivostok, suspended trading in Hong Kong before the market opened Monday.
Tigre de Cristal staff and agents have been the target of a third, possibly unconnected, probe by police in northeastern Heilongjiang and Jilin provinces into gambling tourism by Chinese nationals. Seventy-five suspects have been charged across 12 provinces.
