Reuters arrested Macau casino shares amid arrests

© Reuters. FILE PHOTO: The Suncity Group’s logo for Macau’s junkyard operator appears at a game fair in Macau, China, November 18, 2015. REUTERS / Bobby Yip // File Photo

Written by Eduardo Baptista and Annemarie Rontree

HONG KONG (Reuters) – Shares of Macau casinos tumbled on Monday, dragged down by the arrest of 11 people over alleged links to cross-border gambling and money laundering, and the founder of the gaming center’s largest junkyard operator was among those detained.

Shares in MGM China (OTC:) fell 10%, while where is macau (OTC:) lost 7.8% and Sands China (OTC:) fell 5.3% as investors feared the potential loss of business in the near term as well as the long-term effects of a tough watershed stance being taken by the authorities in the sector. Macau and mainland China.

Alvin Chao, founder of Suncity – a junkie operator that brings big players to play in casinos, extending credit to them and collecting their debts – as well as CEO of gambling investment firm Suncity Group Holdings, were among those arrested, Macau broadcaster TDM reported.

Macau authorities said earlier that police were questioning a 47-year-old businessman surnamed Zhao, without specifying his identity.

Authorities in the eastern city of Wenzhou on Friday issued an arrest warrant for Alvin Zhao, accusing him of running gambling activities in mainland China, where gambling is illegal.

“Suncity accounts for more than 50% of junk revenue (in Macau), which is roughly 50% of gaming revenue, so Suncity accounts for 25% of gaming revenue,” said Carlos Lobo, a gaming consultant in Macau.

“The impact on the gambling industry is huge…but Suncity is no longer too big to fail, the system is not going to collapse.”

Sun City Group Holdings did not respond to a Reuters request for comment.

Macau police said on Sunday that 11 people arrested had confessed to some allegations, including setting up offshore gambling platforms and engaging in illegal virtual betting activities, but refused to cooperate on other issues.

Wenzhou authorities have accused Chau of setting up a network of unwanted agents in the mainland to help citizens engage in offshore and cross-border gambling activities as well as setting up an asset management company in the mainland to help gamblers make cross-border money transfers.

The new era of gambling

Ben Lee, founder of gaming advisory firm IGamiX in Macau, said the tougher stance – which comes amid a widespread regulatory crackdown in China on a range of sectors including technology and property – signals a new era of gambling in Macau and its relationship with mainland China.

“This means that China will no longer tolerate Macao’s promotion of gambling in any way or form on the mainland,” he said.

He added that the authorities, having learned that they could control the flow of visitors to Macau with the advent of COVID-19 border controls, had now moved to control the type of visitors and that the Special Administrative Region would now have to rely on mass-gamblers in the market rather than the big players.

Casino operators in the former Portuguese colony have recorded historic losses since the start of the epidemic, as quarantine requirements in China have made it too expensive for most mainland tourists to travel there.

The Macau units of US casino operators Sands, MGM and Wynn saw revenue fall nearly 80% last year, and the sector will now also have to grapple with the potential threat to tourism posed by the new coronavirus alternative, Omicron.

Shares in Suncity Group, which has a market value of HK$1.7 billion ($220 million), were suspended from trading Monday after dropping 165% so far this year.

Before the COVID-19 pandemic, Macau’s government got more than 80% of its tax revenue from the gambling industry, which employed about three-quarters of the territory’s 600,000 residents, directly or indirectly.

(1 dollar = 7.7989 Hong Kong dollars)

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