The Chinese government last week issued an arrest warrant for Alvin Chau Cheok Wa, the leader of Macau junket operator Suncity Group, and Macau authorities took him into custody the next day.
In a statement issued that day, police explained the situation.
“According to the evidence obtained in the criminal investigation, the police authorities of the Macau Special Administrative Region took, in accordance with the law, this morning (27 November) a suspected person with the surname Chau and others involved.
“The Macau SAR Government reiterates that all workers in the gaming sector in Macau must strictly comply with national and Macau laws.”
The charges accused Chau of promoting cross-border gambling, a practice that is prohibited in China where the only legal gambling location is Macau. The arrent warrants says Chau ““seriously hampered the social order of our country.”
In addition to Chau, authorities also detained Zhang Ningning, whose role in the junket operator was unknown.
Suncity Group is one of the most successful junket operators in Macau, with VIP rooms in several Macau casinos. Chau is also a central figure in the Hong Kong-listed public company, Suncity Group Holdings, which is developing several casinos in Asia.
The company issued a statement saying it had contacted Chau but he has not yet responded.
“Sun City Gaming Promotion Co Ltd. is currently and fully following up on the relevant issues. The company hereby emphasizes that, all businesses are normally operating in accordance with the law and under the supervision of the Macau Special Administrative Region Government.”
The arrest warrant accused Chau of contracting with the Macau casinos to transport Chinese citizens to gamble, as well as setting up online gaming operations from the Philippines.
“For gaining illicit interests, Chau Cheok Wa has organised Chinese citizens to gamble at his gaming rooms overseas and participate in the cross-border Internet gambling activities via the arranging of shareholder-level agents and gambling agents within the mainland, and offered high-value credit, promoting gambling businesses as well as providing chauffeur services and technical assistance.”
The statement continued, “According to the criminal facts investigated by the public security department, the People’s Procuratorate of Wenzhou city has decided to approve the arrest for Chau Cheok Wa due to his alleged involvement in the crime of establishing casino, which is in accordance to the People’s Republic of China’s penal code and criminal procedure law. Here, the public security department urge Chau Cheok Wa to surrender as soon as possible, so that leniency can be considered.”
In 2019, Chau took the unusual step to explicitly deny he was involved in illegal gambling, holding a press conference in July of that year to state he was not on the “wanted list” of the Chinese government, according to GGR Asia. At that time, there were reports that China was cracking down on “proxy betting” from the Philippines, where gamblers in China would view a live game in a Philippine casino and have a proxy place wagers for them.
Analysts immediately weighed in. JP Morgan Asia sent a note to investors titled “Adios Junkets.” Chau and Suncity are “arguably the biggest (and certainly most famous) figure in the junket industry, as the founder/chief executive of the undisputed biggest junket in the world, Suncity Group, which accounted for 40 percent to 45 percent of the junket market,” the report read.
“The fact that even he can be arrested—for just running the junket and doing (what seems to us like very) normal junket activities—should send a chill down the spine of any and all junkets.”
China’s crackdown on cross-border gambling was always intended to apply to the many non-Chinese Asian casinos but there was a question whether it would also apply to Macau. Chau’s arrest seems to answer that question.
“This is, from what we understand, the first high-profile crackdown on the junket’s senior management itself, because most (if not all) of the previous arrests and detentions over the past six-plus years have focused on agents and ‘foot soldiers’ who actually carried out illegal operations,” said the JP Morgan report.
While the reports is clearly bad news for the VIP sector in Macau, JP Morgan pointed out that the decreasing dependence upon junket operators doesn’t mean a death knell for gambling in Macau.
We’ve already assumed structural impairment to this (VIP) segment given heightened scrutiny since 2020,” the report said. “We’ve modelled VIP only driving 1 percent to 4 percent of operators’ earnings before interest, taxation, depreciation and amortization in 2023 (or about 2 percent of sector profit as a whole).
