Fall of Asia’s gambling kingpin augurs change for Macau

In the opulent back rooms of casinos in the Chinese territory of Macau, Asia’s gambling kingpin, Alvin Chau, ran a business that rivalled the US’s largest casino companies and an online betting operation twice the size of China’s national lottery.

With gambling illegal in mainland China, the 32 sq km former Portuguese trading town has long been a destination for the country’s high rollers.

Pre-pandemic, the more than 40 casinos in the city generated turnover nearly six times that of Las Vegas. So important is revenue from Macau to the large US casinos that Las Vegas Sands sold out of Nevada to concentrate entirely on its Asian operations.

The city’s jailing this month of Chau, a 48-year-old gambling promoter, after he was found guilty of illegal gambling, fraud and involvement in organised crime has exposed a sprawling empire that spanned the continent. Over the past two decades, Chau has emerged as one of China’s largest underground financiers, according to former Macau officials and casino executives who worked with him.

“[With the trial] you have a portrait of how Macau gaming actually worked . . . Macau has always been a washing machine but [the case]” exposes the extent of it, said Jorge Menezes, a Macau-based lawyer.

Chau’s downfall — driven by Beijing’s determination to crush the escape of elite capital through Macau — is set to change the gambling business in the territory. After nearly two decades of rising casino profits, tougher times are ahead, said Ben Lee, an Asian gaming expert and managing partner at IGamiX Management and Consulting.

“It means we would no longer see the volatile rise . . of gaming revenue,” he said. “It would be an extremely difficult challenge to replace the loss of [earnings from elite high rollers] with mass market or non-gaming revenue.”

Chau was a protégé of “‘Broken Tooth”, the former head of the 14K organised crime group, according to a 2018 due diligence report by the Hong Kong Jockey Club, who was jailed for 14 years in 1999 for gang-related crimes after the Macau police chief’s car was bombed.

He then rose to prominence as he professionalised the gambling, marketing and entertainment business as the head of “junket” company Suncity, which had dozens of rooms catering to high rollers inside nearly all of Macau’s casinos. Junket operators extend credit to high rolling Chinese gamblers when they come to Macau to gamble.

But according to a judgment released by a court in the city that sentenced Chau to 18 years, he also ran an illegal “under the table” gambling operation. This illegal operation had a turnover between March 2013 to March 2021 of just under HK$821bn ($105bn), the judgment said, about equivalent to the combined revenue of the three biggest US casinos in the city over the same period. 

The size of this trade reflects the fact that Chinese elite have typically used junkets to channel vast amounts of money out of the country, which enforces strict capital controls. This is done by depositing funds in the accounts of junkets and underground banks — informal financial institutions used to transmit funds illegally — in the mainland and then cashing out their unused casino chips in Hong Kong dollars, a convertible currency, and sending it abroad.

Casino executives described the estimate of Suncity’s illegal gambling turnover outlined in the judgment as “conservative” and said Chau’s ability to attract the mainland elite to Macau was unmatched in the industry. “You could not avoid dealing with him,” one said.

Chau, whose private life has also provided popular tabloid fodder, became known in Hong Kong as “Wash Rice Wa” after a handsome 1980s sitcom character. Washing rice is also a local euphemism for money laundering.

The executives also called Chau’s Suncity a highly sophisticated financial services institution with thousands of employees, including former senior bankers. Chinese citizens gambled more than Rmb1tn ($147.4bn) annually through Suncity’s online business, nearly twice the size of China’s national lottery revenue in 2018, according to a state media report. Suncity also ran an asset management business in China for properties requisitioned if gamblers could not pay their debts.

“It was the size of Suncity, the sheer financial impact of Suncity [which alarmed authorities], this is a company with thousands of employees, responsible for . . . 25 per cent of total casino earnings for Macau pre-pandemic,” a former Macau government official said.

Chau’s reach extended far beyond China.

Some Australian casinos have had licences suspended after allowing Suncity to run gambling rooms for VIP high rollers on their premises. “Money was laundered through the Suncity VIP room at the Melbourne Casino,” stated one of several Australian government reports that contained allegations about Chau’s activities.

Chau’s arrest in 2021, along with Levo Chan, the second-largest junket operator in the city, and sentencing is set to pave the way for more limited profits for international casino companies, analysts said.

Now renamed LET Group, Suncity continues to be listed on Hong Kong’s stock exchange but has shut its “junket” rooms and cut staff.

The bulk of rival junkets in Macau have folded following the arrests. As a result, Beijing has in effect cut off the VIP gambling business, which made up 46 per cent of casino revenues in 2019, forcing casinos to rely much more heavily on ordinary “mass market” gamers.

“It will be interesting to see how long it takes [to fill] the void,” said Lee, the Asia gaming analyst.

Pedro Leal, a member of Chau’s legal team, said the gambling magnate planned to appeal against the sentence. “VIP gambling will never be the same,” he added.

Additional reporting by Chan Ho-him in Hong Kong