Suntrust Home Developers owner arrested by Macau police for running a cross-border gambling and money-laundering syndicate
Suntrust Home Developers [SUN 1.13 8.13%] owner Alvin Chau was arrested a few days ago by Macao police, after an investigation that started in August of 2019 into illegal gambling platforms and money laundering activities. Mr. Chau owns Suncity Group Holdings (halted in Hong Kong), which owns Fortune Noble Limited, which owns 51% of SUN’s outstanding shares.
He was referred to by police as the “kingpin” of a scheme to “[set] up of gambling platforms outside Macau and the luring of mainland Chinese into betting illegally online”. Mr. Chau also has an outstanding warrant of arrest in mainland China, but the Macau police said that their warrant and arrest of Mr. Chau was not related to the warrant issued by China, but that the Macau police have been “cooperating with law enforcement agencies elsewhere to exchange intelligence”.
SUN’s initial disclosure, released at 10am, only referred to “an announcement in relation to news coverage regarding Mr. Chau”, but a follow-up an hour later got into all the dirty details. Mr. Chau was arrested by Macau police for illegal cross-border gambling activities, that Suncity Group will continue to operate with professional managers despite Mr. Chau’s detention, that the board feels the incident “does not have any direct material adverse impact on the financial position, business or operation” of the businesses, and that Mr. Chau would resign as Chairman and as directors of the various companies.
MB BOTTOM-LINE
A lot of the reporting around Mr. Chau’s arrest seems to straight-out say that he was arrested for doing what he appears to be currently doing through SUN right now: building offshore gambling platforms in countries near to China that can be used to facilitate the voracious gambling appetites of select wealthy mainland Chinese, either through online gambling (which is illegal) or through in-person junkets (which comes with its own problems).
It’s not clear to me how the arrest of Mr. Chau on these charges, and the potential loss of Mr. Chau as a funding source for Suncity Group and SA Holdings (both have massive interests in SUN) do not provide material risk to Suncity Group or SA Holdings.
It’s also interesting to me how neither of the disclosures by SUN actually discuss the impact of Mr. Chau’s arrest (and the potential for this arrest to seriously undermine SUN’s business model) on SUN itself; all of the quotes provided seemed more concerned with what happened on the Hong Kong stock exchange to SUN’s ownership group.
What about SUN? Are there material risks to its “Chinese gambling junkets” casino resort business plan now that SUN’s owner has been arrested for arranging Chinese gambling junkets?
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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