Millions reported missing by a casino junket highlight the shadowy gambling world
Macau's casino industry has been suffering an extended downturn
A Beijing-led anti-corruption campaign has deterred high rollers
Macau: It’s where billions are made. And where multimillions go mysteriously missing.
In a development that wouldn’t be out of place in Hollywood heist movie “Ocean’s Eleven,” a company that operates the high stakes rooms at Wynn Macau reported earlier this month it had been the victim of a multimillion dollar scam.
The company was a junket operator, which play the middleman between casinos and their big spending gamblers.
They vet and invite high rollers to play the VIP rooms at casinos and also lend players money – allowing them to circumvent restrictions on how much cash can be brought outside mainland China.
Local police handling the investigation estimated the missing money to be at least 270 million Macau patacas (about $34 million) but declined to give further details.
Feeding the scandal, the aggrieved company, Dore Holdings, took out an advertisement in a local newspaper naming and accusing a former employee of embezzlement.
Wynn Macau, run by Las Vegas casino magnate Steven Wynn, issued a statement saying they did not lose any money but it’s the latest unsavory incident to surface in the world’s largest casino hub – following the bust of a prostitution ring and roundup of 4,000 alleged triad members earlier this year.
The multimillion dollar swindle comes at an especially bad time for the Macau government as it tries to reposition itself as a wholesome and family friendly tourist destination.
The city, the only Chinese territory where casinos are permitted, has been grappling with a long losing streak, with China’s anti-corruption campaign deterring high-stakes gamblers.
While revenues are still seven times those of Las Vegas, they’ve dropped for 16 months straight.
Shadowy but ‘necessary’ middlemen
Some industry insiders think the Dore fraud could be much higher. Jamie Soo, a gaming industry analyst at Daiwa Capital Markets, estimated it could be as high as HK$2 billion or $238 million.
In its aftermath, Macau’s gambling regulator said it would encourage transparency by enforcing stricter regulations requiring junkets to reveal their shareholders’ identities.
It also warned of the illegality of junket operators acting as unauthorized financial institutions – that is investors should not be lending money to the junkets for them to re-lend to gamblers.
Casino junkets may be a shadowy world but Grant Govertsen, an analyst at Union Gaming, says they are a “100% absolute necessity” for conducting business with mainland Chinese customers.
“There are two reasons for this. Number one is the sourcing of customers,” Govertsen told CNN.
“The junkets have the municipal-level intelligence and they are operating in mainland China. They know who is, for a lack of a better phrase, a good credit or not. There is no system in China like you would have like in the U.S., where the casinos can run a credit profile of anybody.
“Number two, gambling debt is not recognized a legal debt in China… Wynn could give you credit. If the (debtor) says ‘screw you,’ there’s not much you can do other than not invite him back. Hence, the junkets are also debt collectors.”
It is not the first time vast amounts of money have gone missing. Last April, a former staff member of another Macau junket reportedly absconded with $1.3 billion, sending shockwaves through the casino industry.
The year began with a high profile bust of a prostitution ring, run by a member of the city’s most powerful family.
Alan Ho, a nephew of casino tycoon Stanley Ho, was arrested at Hotel Lisboa in a sting operation for running a syndicate that involved over two thousand women, local media reported. Ho remains in detention while the investigation continues. The Macau prosecutor’s office declined to comment.
Just a few months earlier, his cousin Pansy Ho, head of MGM China, spoke to international media about her grand plans to create attractions in Macau that specifically are not gambling-related.
The photos of his arrest also couldn’t be more different to the family-friendly image that his other cousin, Lawrence Ho, CEO of Melco Crown Entertainment, is pursuing with his new resort, Studio City. Launching at the end of October, it promises Warner Brothers-themed fun zones and Ferris wheel rides.