LVS Says It Dumped Macau Junkets in December 2021

Posted on: February 7, 2022, 10:52h. 

Last updated on: February 7, 2022, 12:27h.

Philip Conneller Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

LVS Corp severed its ties with its three main Macau junket operators in December 2021, according to a statement in its annual report, filed Friday.

LVS junkets
Tak Chun junket boss Levo Chan is arrested by Macau authorities on Jan. 30, 2022. (Image: MNA)

The company said there could be “no assurance we will be able to maintain or grow, our relationships with gaming promoters [junkets].”

Moreover, it could not be certain that junkets would continue to be licensed in Macau in the future, which could negatively impact its business. LVS operates casinos in Macau through its subsidiary, Sands China.

The move demonstrates that operators are facing up to the new reality in Macau. Beijing is no longer in the mood to tolerate the junket model that once generated the lion’s share of casino revenues in the world’s biggest gambling hub.

That model helped LVS to grow into the wealthiest casino operator in the world.

Major Arrests

For years, the junkets have provided Macau’s casinos with a steady stream of high rollers, offering them credit to bypass controls on the movement of money out of the Chinese mainland.

But Beijing is waging war against cross-border gambling and those who facilitate it. The Chinese government seeks greater control of private capital to maintain the stability of the foreign exchange rate.

China’s Ministry of Public Security has said that about RMB1 trillion (US$145.5 billion) flows out of the mainland into gambling activities every year. This was a “threat to the country’s economy and national security,” it said.

In November, prosecutors in the city of Wenzhou issued an arrest warrant for Suncity boss Alvin Chau, the world’s biggest junket operator. He was detained in Macau just days later. Prosecutors in the gambling hub have charged Chau with operating a criminal syndicate, offering illegal online proxy betting from the Philippines, and money laundering.

Then, in late January, Macau police arrested Levo Chan, the head of the second-biggest junket operator, Tak Chun. He is accused of illegal gambling, money laundering, and being the head of a triad gang.

Sudden Death

The junkets’ importance to Macau’s casino industry has been in decline since 2013 when Beijing began to apply pressure on the VIP segment as part of an “anti-corruption” crackdown.

But the suddenness of its downfall in recent months has been staggering. In addition to the arrests of its two most significant figures, a ruling handed down by Macau’s high court in November indicated the writing was on the wall for the junkets.

The court held that casino operators were jointly liable with junket operators for deposits made at the VIP rooms run by the junkets. That meant the relationship would longer be relatively risk-free for the operators, as LVS said in its filing.

While we strive for excellence in systems and practices for monitoring the activities of gaming promoters operating in our casinos, we cannot assure you that we will be able to monitor all activities carried out by them,” LVS told its shareholders.

“If a gaming promoter falls below our standards, we may suffer reputational harm, as well as worsening relationships with, and possible sanctions from, gaming regulators with authority over our operations.”

“Furthermore, we cannot assure you to what extent the Macau courts will in the future find us liable for the activities carried out by gaming promoters in our casinos, nor are we able to determine what Macau courts would deem typical activities of gaming promoters to be,” it added.