Lu Zhong Lou, a 49-year-old Chinese businessman, was reported to owe more than HK$3.5 billion (US$451 million) to Macau casino junket providers. It seems that Mr. Lu was a frequent visitor of famous gambling venues, such as Wynn Macau and Galaxy Macau.
The Chinese high roller is currently owner of the so-called Qinhe Energy Group, a quite successful coal mining company that operates anthracite mines in mainland China.
It appears that Lu’s huge debt is due to side betting, an arrangement between the player and the junket provider where the face value of every chip on the table may be multiplied up to ten times. It is important to note that side betting is considered illegal.
What makes Lu’s situation even worse is the fact that there is interest that is accumulating constantly. In the past, casino high rollers had to pay their debts within a month. Now, they are allowed to make monthly installments with an interest rate of 3%.
And some do not pay their debts at all. Last month, the Hengsheng Group, a popular gaming operator in Macau, reported that almost one-third of its most considerable junket loans have been accumulating for more than a year now.
Standard Chartered analysts referred to the junket industry in Macau as “broken”. As it was reported, less and less VIP players travel from mainland China to Macau, due to the corruption scandal that was sparked not long ago. This means that operators are currently in a severe competition for customers.
It was reported that Mr. Lu has strong connections to people who stand high up in the political and social hierarchy of China. For instance, the daughter of an important army general is working for one of Lu’s companies. Creditors seem to find it hard to raise the issue of his huge debt, due to his ties. According to local media, two of his creditors were detained for unspecified reasons.
Charlie Choi Kei Ian, owner of the Wonderful World website, shared that Macau needed to establish a system that would inform both creditors and junket operators about all the risks that their operations involve. Back in April, Charlie Choi was arrested for posting on his website the names of several people who had failed to pay their gambling debts.
The hardships that junket operators are currently facing may have contributed to delays in the completion of a major junket acquisition deal. Back in January, International Entertainment Corp. announced that it was to acquire 70% of Suncity International Holdings. But up to October, the HK$7.35-billion (US$948 million) deal was not signed yet.
Now, when the junkets are doing so badly, new regulation will be introduced. A few days ago, it was announced that Macau will sign a special agreement with the United States for the prevention of money laundering and terrorism. What is more, the famous gambling hub is also expected to ink a memorandum for sharing confidential financial information with the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury.
A shortage of cash has also restrained the appetites of high-stakes gamblers, caused by a tightened credit policy on the Chinese mainland, a ban on UnionPay cards at casinos, and more cautious credit loans after the disappearance of a Macao junket operator who owed more than $1 billion.