On Wednesday, 48-year-old Suncity Group founder and former CEO Alvin Chau Cheok Wa was sentenced to an 18-year jail term. He was found guilty of facilitating illegal gambling activities in Macau, China’s Special Administrative Region, and on the mainland. The once-powerful business mogul has been convicted of 162 counts of fraud, illegal gambling, and organized crime.

Mr. Junket King, as he had come to be referred, resigned in December 2021 following his arrest and has spent the past 13 months detained at the Coloane Prison. Chau was first arrested in November 2020, alongside several other parties purported to have been carrying out illegal online gambling in a bid to circumnavigate the country’s gambling laws. According to the investigation leading to the verdict, the criminal activities perpetrated by the tycoon, some employees, and associates of the company, led to massive losses in tax revenue. It is estimated that Chau and his culprits evaded taxes to the tune of HKD8.26 billion ($1.05 billion) through illegal online gambling activities.

About 20 others arraigned alongside Chau were also sentenced to prison terms ranging between 9 and 15 years. Chan Weng Lin, CEO of the Macau Legend Development and chairman of Tak Chun Group and Chau’s arch-rival, is also under investigation for similar charges. Lin stands to be sentenced to a similar term should he be found guilty.

The Start to Finish of Chau’s Fall From Grace

To better understand the situation that Alvin Chau now finds himself in, it’s important to go a little further in time. It all began with President Xi Jinping’s crackdown on illegal businesses and corrupt officials. The concern raised by Jinping’s administration is that Macau’s gambling industry was being used as a cover for cross-border money laundering. This kicked off the junket crackdown that’s since led to a significant shrinking of the industry by 85% since the junkets’ peak in 2014.

The recent casino operators’ license renewal rules give conditions under which junkets can operate, the most notable being that they are required to run their services under licensed operators. For example, the Suncity Group became renowned for its VIP junket businesses that would lend money to high rollers to participate in gambling at the operator’s junket rooms.

Chau’s first arrest in 2020 was the beginning of a downward spiral for the once lucrative part of the Macau gambling market. Junket operators across the region began closing down their businesses for fear of being implicated in criminal activities while also citing pressures related to the pandemic.

Even the Suncity Gaming Promotion Company Ltd, which was operating several VIP gaming rooms, had to subsequently cease engagement in the business. The Suncity promotion entity was later dissolved in December 2021 amid judicial hearings on the defendants. The company had been in business for well over a decade since being founded in 2007.

The company’s closure led to a colossal unemployment gap and uncertainty regarding funds owed to players. Five of the six Macau-licensed operators have petitioned the courts to hold Suncity accountable for revenue losses that were a result of the group’s activities. Chau is also required to pay the government over HKD6.5 billion ($0.83 billion) apart from HKD178 million (22.72 million) to HKD770 million ($98.28 million) requested in the operators’ petition.

While addressing the court during the trial, Alvin Chau denied any involvement in suspicious and illegal activities. He emphasized that neither he nor his colleagues had received any criminal proceeds and conveyed shock that Suncity was being referred to as a criminal syndicate. Chau told the court:

Quote

“My colleagues have not seen a cent of criminal proceeds up until now … We have never paid additional compensation for illegal acts.”

Gaming consultant and former Macau government gambling adviser David Green told reporters that the Junket system was a front for moving laundered money. According to him, it was a vice that would have persisted had it been kept alive. Green added that:

Quote

“The casinos themselves can’t afford to take the risk of being held jointly liable with the junkets for their misdemeanors.”

What Does the Future Hold for Macau’s Gaming?

Macau is the only place in China where legal betting can occur, and placing bets from any other location is considered illegal. This is why Chau and his co-defendants were charged with orchestrating proxy betting that allowed Chinese gamblers to bet remotely in casinos outside Macau. These wagers were considered ‘under-the-table bets,’ which have reaped harsh results for the accused.

Since the pandemic hit in 2020, Macau’s economy has been worsening. Following new infection bouts that led to business closures in the SAR to avoid a further spread of the virus, taking its economy to an all-time low in 2022. The junket industry was one of the main reasons Macau continued to enjoy years as the world capital of gambling, with a bigger market than Las Vegas.

Jinping’s anti-corruption and zero-Covid policies being executed during the same period have put the SAR in a precarious state as casino operators begin their second licensing terms. Although experts have expressed positivity regarding a potential post-Covid recovery due to the easing of some of the Coronavirus restrictions, there is still a lot to be considered before any conclusions can be drawn.