How One Macau Arrest Could Affect the Online Casino Industry Globally

Often, landbased casinos face problems which wouldn't even be considered at real money online casinos. For example, recently a Hamilton casino shut down to adhere to Covid-19 protocol. And this week's news article is no different. Share prices in the world’s largest gambling hub took a nosedive after the CEO of Suncity Group Holdings (gambling operator company) was arrested in Hong Kong. The detainee is popularly known as Macau’s ‘Junket Mogul’ and his name is Alvin Chau. Chau heads one of Macau’s largest junket operations which is known for luring in high rollers to splurge at swanky casinos. Chau was arrested on Sunday, November 28th on the merit of an arrest warrant issued for him in China over alleged illegal cross-border gambling operations.

The arrest marks what could be the beginning of suppression by the Chinese Communist Party against cross border gambling. The CCP do not like the fact that substantial amount of money is flowing out of mainland China and into Hong Kong via such junket operations. They are concerned that it will have a negative economic impact and may destabilize economic security in the mainland.

China experts allege that the crackdown will get more restrictive from here as China looks to apprehend anyone that will market gambling services to their citizens using a zero-tolerance approach. In China, as per the letter of the law, all forms of gambling are illegal. Considering this, it is no wonder that share prices related to the gambling market plummeted almost overnight. Macau will now longer be able to target niche high-rollers from the mainland and will have to re-align their products and services to cater to the general market instead.

Ben Lee, the founder of IGamiX (a Macau based gambling consultancy), stated that promoters are now aware the any efforts to get players to come to Macau from the mainland will be dealt with seriously and the consequences can be severe for violators. Even something as little as making a phone call to get a player to come down can get organizers into a predicament.

Experts claim Suncity Group Holdings will start scaling down

Even though Suncity has not made an official statement, analysts with insider information are of the opinion that the company will not only shut down all of their casino VIP rooms intended for niche, high-roller clientele, but will also start laying off a huge percentage of their workforce. Ben Lee claims thousands of people are going to lose their jobs in due course and it is going to have a direct impact on Macau’s economy.

Experts also suggested that the crackdown didn’t exactly come out of the blue. Even though the timing was unforeseen, Macau based operators had a sense that the CCP were rubbed up the wrong way about money leaving the mainland. Supposedly, Chinese authorities have been looking into the matter for over 24 months. The crackdown on cross border gambling is part of larger effort by the CCP to bring in a variety of sectors and keep the money within their own economy. There have been several regulatory changes in recent times to propel such measures.

Macau is also known as the Las Vegas of Asia. And Alvin Chau’s operations alone is said to have roped in over one-fourth of Macau’s total gambling revenues. Macau supposedly reported $550m in Gambling Revenue in October which was already 40% lesser from 2020. Stocks such as MGM China, Wynn Macau and Sands China fell by 15%, 11% and 9% over the last 48 hours.

Chinese officials in the mainland Chinese city of Wenzhou have implicated Chau of establishing a junket agent network that assists individuals in partaking in offshore and cross-border gambling, as well as creating corporations that assist gamblers in sending their monies across borders to fund their wagers. Officials in Macau have additionally implicated Macau and 10 other individuals of starting a live betting online casino based in the Philippines that is said to have targeted Chinese players almost exclusively.

The CCP may consider tracing down customers of Chau who gambled illegally

There is reason for gamblers based in the mainland to worry too. Considering that Chau’s operations attracted over 80,000 regular users from the mainland, the list could be demanded by the CCP and gamblers on the name list could be implicated for violating the gambling ban in China. In fact, some experts think that a lot of the names could even be civil servants and individuals within the CCP itself.

Suncity Group released a statement suggesting that Chau would resign, but the company would continue their operations with or without the backing of Chau. Suncity Stock prices fell an incredible 48% a few days ago and touched a record low. With the current stock price, their company valuation still comes up to $113m.

Alvin Chau is said to be imprisoned at Macau's Coloane Prison on charges of unlawfully operating casinos. Suncity's Hong Kong and Macau websites were both down on Wednesday, and trading in the group's Hong Kong shares was also halted twice in just 1 week.