Gaming Law International

Companies from Asia move into Las Vegas to cater to Chinese consumers abroad

Earlier this month Reuters published an article that Malaysian casino operator, Genting Bhd, closed a deal on the purchase of a 87-acre plot of land in Las Vegas, representing the largest investment in Las Vegas since at least 2008. The announcement follows on the heels of the announcement by China's largest property developer, China Vanke Co. Ltd., that it had formed a joint venture to develop two high-rise condominium towers in Las Vegas. Both projects are presumably aimed at targeting mainland Chinese consumers who prefer to purchase goods and services from Chinese companies when travelling abroad.

The deals are worth about US$1 billion combined. According to the article from Reuters, the transactions signal a move of Asian corporations away from investment into natural resources in the US or Canada and into services industries that cater to Chinese consumers abroad. 

The foray of these companies poses a risk to existing casino and entertainment establishments in Las Vegas because they will target Asian consumers who have been the principal generators of gambling revenues in Las Vegas since 2010.

"If you're smart, you start settig up places for Chinese people to stay and things for them to buy," Derek Scissors, an economist with the Heritage Foundation a Washington-based organization that advances free enterprise and limited government, told Reuters.

And smart is exactly what China Vanke Co., Ltd. and Genting Bhd appear to be by venturing into Las Vegas. 

China's new cashless casino bar opens

As China's first casino, albeit a cashless one, opens gaming executives and service providers around the world are watching to see if it will result in the introduction of real gambling in the country. Jesters Casino Bar, part of the new Mangrove Tree Resort World on Sanya Bay on Hainan Island, China, is the first approved form of gambling in China outside of Macau. Gamblers can gamble with real money but cannot win cash - instead they win point redeemable for goods and services at the Mangrove Tree Resort. Casino watchers expect that within a year or two, the Chinese government will allow real money payouts at this location and many others. If gambling is legalized in China, the government and service providers stand to earn billion and billions of revenues a year. You can read more from Reuters here. 

California reintroduces bill to allow sports betting

Today, the California ] legislature reintroduced a bill to legalize sports betting at state racinos, casinos and other gaming establishments on professional and colleage sports events, except for college sports events in California. If the bill is passed, it would still need to be approved federally.

Interpol reports over 680 suspected soccer match fixes

According to a report by Interpol released on Monday, as many as 680 soccer games played around the world may have been fixed by organized crime. As many as 425 people appear to be involved from 15 countries in Europe, Asia, Africa and South America. Interpol believes approximately $10 million in profits were laundered from the match-fixes. More from The Wall Street Journal.

Nevada moves to legislate online poker

The Governor of Nevada, Brian Sandoval, in Tuesday asked the state legislature to approve a bill that would allow Nevada to enter into agreements with other states to offer online gambling, specifically poker, and that would also repeal an existing law prohibiting interstate gambling until such time as a federal law was enacted to address the issue. Nevada does not want to be left behind it the US moves to allow online poker. 

Philippes offers discounts to junket operators to lure high rollers into casinos

According to this article by Reuters, the two new casinos in the Philippines are hoping to lure junket operators from Macau to bring gamblers from China to gamble in the Philippines by offering lower gambing taxes and lucrative payment terms. 

There are approximately 200 junkets operating in Macau. They typically bring wealthy gamblers from areas such as China, and rent VIP rooms in Macau casinos for their clients to gamble. Junkets operators issue credit to their high-roller clients, and earn commissions from the funds gambled by their clients at casinos. They generate about 70% of the funds gambled in Macau. 

There are identified money laundering risks with junkets, from the Financial Action Task Force and other organizations, in the context of gambling. The risks exist because there are gaps in controls and weak supervision of their operations. Junket operators control the movement of money to and from the casinos which can obscure the anti-money laundering processes. Moreover, they bring in high rollers to gamble who are subject to relaxed money laundering vetting, not more, as is required. 

Despite these risks, the Philippines is hoping to enter into arrangements with junkets to help grow the national gambling market and join Macau and Singapore as one of Asia's top gambling destinations. Analysts predict that the gambling market in the Philippines will reach $3 billion by 2015.

The two new casinos are Solaire Resort and Casino on Manila Bay, owned by Bloomberry Resorts Corp., which is controlled by billionaire Enrique Razon Jr.,and is a $1.2 billion project slated to open in March 2013; and Belle Grande Casino in Entertainment City Maninla, owned by Belle Corp., which is controlled by billionaire Henry Sy, and Melco Crown Entertainment Ltd., owned by Australian billionaire James Packer and Hong Kong businessman Lawrence Ho, and is slated to open in March 2014. Melco Crown is listed on the Hong Kong Stock Exchange.

Mastermind behind casino card cheating scheme sentenced in US

Van Thu Tran, the mastermind behind one of the largest casino cheating rings in Canada and the US, was sentenced today in San Diego to 26 months in prison. For several years, Ms. Tran, together with several others, cheated the casinos out of US$7 million by various card false shuffling methods during blackjack and mini-Baccarat. Court documents also show that members of her organization bribed casino card dealers and supervisors to perform false shuffles, thereby creating “slugs,” or groups of unshuffled cards. After tracking the order of cards dealt in a card game, a member of the group would signal to the card dealer to perform a “false shuffle,” and other members of the group would then bet on the known order of cards when the slug appeared on the table. By doing so, they repeatedly won millions of dollars. They also used sophisticated mechanisms for tracking the order of cards during games, including hidden transmitter devices and specially created software that would predict the order in which cards would reappear during blackjack games. Tran was sentenced for, amon gother things, racketeering and money laundering. See earlier post here.

120,000 Swiss have gambling problems

Interesting article here on Swissinfo.ch on the expansion of gambling in Switzerland and the fact that approximately 120,000 Swiss have a gambling addiction or a problem with gambling. According to the article, research by the Neuchâtel University’s Institute of Economic Research, determined that the social costs of gambling addiction is between CAD$564 million and CAD$681 million annually. 

Madrid new site of EuroVegas casino resort

The Las Vegas Sands Corp. announced today that Madrid has been selected as the site of its next multibillion dollar casino and hotel resort, and not Barcelona. The proposed casino resort will cost approximately €18 billion and will include 12 hotels with 36,000 rooms, six casinos and three golf courses and will be built over a decade. The corporation will inject 35% into development and the remainder will come from external financing.

Europeans dubbed the proposed casino resort "EuroVegas" and the news media in Europe focused almost daily headlines on the fierce competition for the project between Madrid, the nation's capital, and Barcelona, Spain's second-largest city. 

Spain is facing an economic crisis with an unemployment rate of more than 24%. According to reports, EuroVegas developers promised that the casino resort would generate up to 250,000 jobs. The Las Vegas Sands Corp. has apparently said that it will lobby to change the non-smoking laws in Spain to allow gamblers to smoke while they gamble.

Last year, the Las Vegas Sands Corp. surpassed Caesars Entertainment Corp. as the world's largest gaming corporation, posting profits of US$1.27 billion in 2011. The Las Vegas Sands operates, among others, the Venetian and the Palazzo casino resorts on the Las Vegas Strip; the Marina Bay Sands resort in Singapore; and the Venetian Macao and Sands Macao casinos in Macau.

DoubleDown Casino lands in Las Vegas

International Game Technology (IGT) today announced a land-based partnership with the Hard Rock Hotel & Casino in Las Vegas for its DoubleDown casino application. The application will be hosted on the Hard Rock's website and will give gamblers a chance to compete online for virtual chips. First-time users of the appication will receive USD$1 million in virtual chips to start playing. DoubleDown casino is a free Internet-based gambling website, purported to be the world's largest online gambling website.

Revenues up just slightly in Macau

Macau's gambling industry earned CAD$3 billion last month, the second highest ever in its short history, according to figures released by the Gaming Inspection Coordination Bureau ("DICJ"). Gross revenues rose 5.5% over last year, representing the slowest growth since 2009. Gross casino receipts were up 6.3%. The figures alleviate previous concern that the cash-flow from gamblers originating from China has dried up. As a result of Chinese banking regulations which restrict funds that can be removed from China to approximately $50,000 per person per year, gambling in Macau remains a popular vehicle for removing currency from China. Macau has 35 casinos, 5,498 gaming tables and 17,035 slot machines and is one of the most active gambling markets in the world. 

Taiwan votes to allow gambling

The residents of Matsu, a Taiwanese archipelago of 19 islands in the Taiwan Strait, voted yesterday in a referendum to allow gambling and approved the construction of a casino resort. The approval for the casino resort is just the first step in the process - the government first needs to draft and enact gambling legislation. Matsu was selected because of its proximity to the bustling cities of Xiamen,Fuzhou and QuanZhou in Fujian Province, China, where significant numbers of wealthy Chinese residents live. The Matsu casino resort is expected to compete with customers from China who frequent the casinos in Macau.

Nevada gambling commission said to be looking into junkets

According to a report in the Las Vegas Review-Journal, Nevada gaming regulators are increasing their scrutiny over the operation of junkets to Macau-based casinos that are owned or controlled by U.S. gambling companies amid allegations raised by U.S. gaming union officials that Macau-based junkets affect the integrity of U.S. gaming operations. 

There are approximately 200 junkets operating in Macau. They typically bring wealthy gamblers from areas such as China, and rent VIP rooms in Macau casinos for their clients to gamble. Junkets operators issue credit to their high-roller clients, and earn commissions from the funds gambled by their clients at casinos. 

Mark Lipparelli, Chairman of the Nevada Gaming Control Board, said in an interview this week that outside junket operators, which receive commissions from casinos for their work, are "becoming an area of increased attention for us."

Legalized gambling in the U.S. and Canada is premised on the preservation of the integrity of the gaming industry. In order to obtain and maintain a U.S. state gaming registration, casino operators have to operate their casinos in a way that will not negatively affect the integrity of the gaming industry as a whole. As a result any link, however small, to criminality with a casino operator affects the integrity of the operator and the industry. The concerns with criminality arise from the fact that there is an identified money laundering risk with junket operators because, among other things, there are gaps in controls and weak supervision of their operations. Junket operators control the movement of money to and from the casinos which can obscure the anti-money laundering process. 

Absolute Poker founder pleads guilty

Brent Beckley, one of the founders of Absolute Poker, pleaded guilty in Manhattan to conspiracy to commit bank fraud, wire fraud and conspiracy to violate the Unlawful Internet Gambling Enforcement Act and is expected to be sentenced in April 2012. “I knew that it was illegal to accept credit cards from players to gamble on the Internet,” Beckley said to the judge before his plea. “I knew that it was illegal to deceive the banks in this way.” 

In April 2011, the U.S. indicted  eleven people associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang. 

The indictment alleged that:

• Among others, Beckley deceived, or directed others to deceive, U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Beckley paid certain payment processors to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer’s Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Another defendant, Bradley Franzen, pleaded guilty in May 2011.

Full Tilt Poker accused of operating ponzi scheme

U.S. Attorney Preet Bharara today announced that his office has amended its civil complaint against Full Tilt Poker to include claims that Full Tilt Poker operated a global Ponzi scheme. The U.S. Attorney says that Full Tilt was not a legitimate poker operation but rather operated as a Ponzi scheme, routinely draining players' accounts for other purposes, including payments to company founders and members of the board, and in the process defrauded players of US$300 million.

The company's lawyer went on the record shortly thereafter and apparently admitted that in 2010, Full Tilt Poker had insufficient funds on hand to meet the demands of player withdrawals. He also said, apparenly on behalf of Full Tilt Poker, that he did not comprehend the statements made by Bharara with respect to the Ponzi scheme. A Ponzi scheme is a fraud whereby the source of distributions to the early investors consist primarily of a return of their own capital or money obtained from new investors and with the payments ultimately stopping when there are no further investors. The result is that everyone loses money except the perpetrators of the fraud.

On April 15 of this year, the U.S. indicted defendants associated with Full Tilt Poker, PokerStars and Absolute Poker on allegations that they fraudulently circumvented anti-money laundering laws and the Unlawful Internet Gambling Enforcement Act (UIGEA) by disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services, lied to banks about the nature of their businesses and set up fictitious corporations, in order to open bank accounts to accept bets from U.S. players. Scheinberg, one of the founders of PokerStars, is alleged to have acquired a 30% interest in a small bank in Utah called SunFirst Bank in exchange for the Bank agreeing to process payments for PokerStars.

In April, the U.S. also filed a civil complaint against the individual defendants and the poker companies to recover US$3 billion in civil penalties for money laundering. Asset restraining orders were issued against more than 76 bank accounts in 14 countries, including Canada, to freeze the accounts on the basis that the funds are proceeds of crime.