Arrest of Macau junket mogul rattles the world’s largest gambling hub

By Eduardo Baptista

HONG KONG (Reuters) -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 (OTC:) slumping 15%, Wynn Macau (OTC:) tumbling 11% and Sands China (OTC:) falling 9%.

Macau authorities accused Chau and 10 others of using the former Portuguese colony as a base for an…