On January 18, 2023, the Macau Court of First Instance sentenced the founder of Suncity GroupZhou ZhuohuaA historic verdict was made in the case of Xi Mihua (nicknamed "Ximihua") who was suspected of cross-border gambling crimes. This prominent figure who had dominated the business community of Hong Kong and Macau for 20 years was found guilty of 162 counts, including establishing a criminal group, illegal gambling operations and money laundering, and was sentenced to 18 years in prison. This case not only uncovered the dark network of cross-border gambling capital flows, but also revealed the Zhou Zhuohua family's huge asset layout across Hong Kong and Macau. Its complex financial operations can be described as a modern version of a "casino tycoon."
The Collapse of the Underground Casino Empire
The prosecution accused Zhou Zhuohua of establishing the "Suncity" casino system since 2007, recruiting gamblers from mainland China through overseas websites, and conducting cross-border gambling through physical casinos in Macau and online platforms in the Philippines, involving more than HK$823.7 billion in capital over eight years. Even more ingenious is its triple circulation model of "gambling capital - credit - property": gamblers transfer money to Macau through underground banks, and after losing all their money, they sign promissory notes to convert it into legal debt, which is ultimately settled by mortgaging real estate in mainland China. This "legal isolation" design has allowed it to operate in a gray area for many years.
What deserves attention is the key evidence in the trial - the financial transactions between Suncity and Hong Kong-listed Global Strategic Group (08007). The company once provided a loan of HK$1.2 billion to a company under Zhou Zhuohua, and the flow of funds involved multiple luxury housing projects in Hong Kong. The judicial authorities tracked bank accounts in 53 countries and eventually locked down a chain of evidence that showed the man was laundering money at multiple levels through shell companies.
The financing maze behind Tianxi Property
Zhou Zhuohua's asset layout in Hong Kong began at a critical point in 2012. He spent HK$54.5 million through Sun Century Development Company to purchase a high-rise duplex unit (usable area of 1,401 square feet) in the "Sun Diamond" of the Cullinan in Kowloon Station. On the day of purchase, he mortgaged the unit to Hang Seng Bank for a first mortgage loan. On the eve of the launch of the Macau judicial investigation in 2021, the unit suddenly applied for a second mortgage on Melco Crown Entertainment (Macau), a move interpreted by the industry as a cross-border asset preservation strategy.
Real estate industry insiders analyzed that this type of "Hong Kong and Macau double mortgage" model has three advantages: first, it uses the valuation advantages of Hong Kong properties to obtain highly leveraged funds; second, it operates through Macau casino-related companies to facilitate cross-border capital flows; and third, when debts default, cross-border judicial coordination between creditors is extremely difficult. The Bel-Air luxury homes and shops in Shun Tak Centre in Sheung Wan owned by Zhou Zhuohua also adopt similar financing structures.
Cross-border connections in the business landscape
According to the Company Registry records, Zhou Zhuohua's capital network in Hong Kong is centered on Sun International (08029), holding property assets through multiple layers of offshore companies. In 2014, he teamed up with "Chongqing Li Ka-shing" Zhang Songqiao to spend HK$320 million to purchase the three-story shops of China Merchants Building in Shun Tak Center. In 2016, he cooperated with casino shareholder Chen Ronglian to acquire Tseung Kwan O Well-On Shopping Centre for HK$370 million. Both transactions were operated using the "equity pledge + sale and leaseback" model.
It is interesting to note that these properties were successively mortgaged to Macau gambling company-related institutions after Zhou Zhuohua was arrested in 2021. For example, Hui’an Shopping Centre is now managed by a subsidiary of Wynn Macau (01128), while the shops at Shun Tak Centre have been transferred to an affiliated fund of Galaxy Entertainment (00027). This "hostile takeover" phenomenon reflects the redistribution of Zhou's assets by the Hong Kong and Macao capital circles.
The secret war of Hongyan Capital
Zhou Zhuohua's personal life and business empire have always been intertwined. In addition to holding shares in Macau Legend (01680), the wife Heidi Chen also participates in a number of property investments through Hong Kong Analog Engineering (01977). His lover Mandy Lieu established an offshore investment company in the UK and purchased luxury homes such as The Grand in Western Mid-Levels and 9 Deep Bay in Southern District through a private bank in Central, Hong Kong between 2014 and 2017, with a total value of more than HK$400 million.
Legal experts pointed out that most of the Zhou family’s assets are registered under offshore companies in the British Virgin Islands and the Cayman Islands, and jurisdictional barriers are set up through the Hague Convention on Evidence. This triple firewall design of "emotion-capital-justice" allows his family to maintain control over core assets even after Zhou Zhuohua was imprisoned.
Paradigm shift in Macau’s gaming industry
The verdict in this case comes at a sensitive time when Macau’s gaming license is being re-bid, with four of the six major gaming companies revealed to have had business dealings with Suncity. Data from the Monetary Authority shows that the proportion of VIP room business in Macau has plummeted from 66% before the epidemic to 15% in 2022, symbolizing the end of the "stacker" era. The new "Gambling Law" explicitly requires gambling companies to assume the responsibility of reviewing customer funds and prohibits third-party deposits.
Economists predict that the case of Chau Cheuk-wah will accelerate the transformation of Macau's gaming industry towards "non-gaming elements", with projects such as Galaxy Entertainment's Cotai Integrated Resort and Studio City's water park receiving key government support. Hong Kong’s role as a traditional capital transit hub also faces challenges. The recent implementation of the virtual asset service provider licensing system is a new type of regulation aimed at cross-border capital flows.
Ice-breaking test of judicial cooperation
During the trial of this case, mainland judicial authorities transferred more than 200 boxes of evidence to Macau, setting a new record for cross-border judicial cooperation. However, the disposal of Hong Kong properties still faces legal conflicts.Basic LawArticle 158 of the Law on Jurisdiction may lead to competing judgments between the courts of Hong Kong and Macao on the same assets.
The legal community is concerned about whether the Hong Kong Mutual Legal Assistance Ordinance, which is currently in the legislative process, can resolve such problems. Currently, Zhou Zhuohua’s four properties in Hong Kong have entered the creditor takeover process, but the Macau court also claims that it has the right to execute these assets. This jurisdiction conflict may trigger a protracted legal battle.
The aftermath of the capital undercurrent
After Zhou Zhuohua was sentenced, his business partnersChen Ronglian(Chairman of Tak Chun Group) was also sentenced to 14 years in prison in April 2023, indicating that the Macau judicial authorities’ liquidation of the VIP room business has entered deep waters. But it is worth noting that underground gambling funds are turning to the field of virtual currency. A report by blockchain analysis company Chainalysis shows that in 2022, funds flowing into the Philippine BC industry via USDT surged by 340% year-on-year.
Although this trial of the century has ended, the regulatory storm it has set off continues. From MacauCasinoFrom luxury homes in Hong Kong, from offshore companies to virtual currencies, the flow of capital is constantly changing. Under the dual pressure of the retreat of globalization and the upgrading of regulatory technology, the rules of the capital game for the new generation of "casino kings" are being rewritten.
Further reading:
- The final outcome of the century-long case of Xi Mihua, the king of casinos: his appeal failed and he was sentenced to 18 years in prison and became a prisoner with a compensation of 24.8 billion. His business empire collapsed and his breakup agreement with Mandy Lieu (Liu Bili) was exposed
- The Deng family empire is in liquidation crisis. ICBC takes over the Yuepin Resort Hotel and Seaside Plaza, revealing the debt black hole of Uncle Bo's family.
