Crown Investigates Claims Ponzi Scheme Fraudster Laundered AU$8m Through Melbourne Casino

  • The alleged fraudster ran an AU$325m (US$245m) Ponzi scheme through a property business
  • He supposedly laundered AU$8m (US$6.1m) through Crown Melbourne between 2014 and 2017
  • Crown has confirmed it will investigate the claims amid an ongoing Victoria commission inquiry
  • The operator has struggled financially as a result of COVID-19-forced closures and restrictions
Crown Melbourne casino
Crown Resorts intends to investigate claims relating to its Crown Melbourne casino (pictured above) which allege that a Ponzi scheme fraudster laundered AU$8m (US$6.1m) through the property. [Image:]

In the spotlight yet again

Australian casino giant Crown Resorts is taking the heat once again. This time, the allegations revolve around an alleged Ponzi scheme fraudster who supposedly laundered as much as AU$8m (US$6.1m) through Crown’s Melbourne casino.

a fugitive fraudster accused of running an AU$325m (US$245m) Ponzi scheme

As reported by Australian newspaper The Age, Crown has already begun an inquiry into the recent allegations. They center on Michael Gu, a fugitive fraudster accused of running an AU$325m (US$245m) Ponzi scheme through Sydney-based property group iProsperity. The business collapsed last year owing hundreds of millions to investors.

While the scheme was ongoing, either Gu or his business partner sent AU$8m (US$6.1m) of iProsperity funds to Crown Melbourne. Gu later withdrew the cash in a transaction that sources familiar with the matter have said has the hallmarks of money laundering.

In response to the allegations, a Crown spokesman confirmed in a statement Monday that the operator would investigate the claims.

A closer look at the accusations

The allegations arose from a recent report from liquidator Cor Cordis. The firm found that either Gu or his CFO Harry Huang sent at least AU$8m (US$6.1m) to Crown Melbourne between August 2014 and May 2017. The report also confirmed that Gu contacted Crown via email, and that tax authorities questioned iProsperity regarding its dealings with the casino.

According to The Age, Gu either gambled with the AU$8m (US$6.1m) or withdrew the cash for personal use. At the time, the alleged fraudster supposedly utilized investor cash for personal purchases, including a number of sports cars, expensive bottles of wine, and travel by private jet.

Through his iProsperity company, Gu duped investors out of hundreds of millions of dollars by claiming to be buying Australian commercial property. Using that cash, he purchased two Lamborghinis, a Rolls Royce Wraith, a Ferrari GTB, an Audi Q7, and a McLaren Spider. The fraudster fled Australia last August.

In a statement released on Monday, Crown informed: “We are treating this matter seriously and have immediately launched an investigation into the allegations.” The Australian casino operator confirmed it would update regulators, the royal commissions, and relevant authorities as required.

Under fire from all angles

It’s fair to say Crown has had a difficult time so far this year. In February, a New South Wales (NSW) inquiry deemed the operator unfit to hold a Sydney casino license. The judgment, which focused mainly on evidence of money laundering, has prevented James Packer’s company from opening the gaming floor on its AU$2.2bn (US$1.7bn) Barangaroo casino project.

a new money laundering scandal regarding Crown’s acceptance of credit card payments

Rather than putting the matter to bed, however, the ruling kickstarted an additional regulatory investigation in Victoria. Last week, a Victorian royal commission brought to light a new scandal regarding Crown’s acceptance of credit card payments at its Melbourne property. The operator conceded that the practice probably involved money laundering, with payments amounting to at least AU$160m (US$121.28) in total.

Furthermore, this week five Australian casino inspectors have claimed that the Melbourne casino blocked them from completing their regulatory duties. Speaking in a Four Corners and ABC Investigations program on Monday night, the inspectors said they had lost access to certain parts of the casino, adding that they felt staff acted in an unwelcome manner towards them.

Despite the failings unveiled in the inquiry, new Crown CEO Steve McCann has backed his employees and their desire to prevent innapropriate conduct. Commenting during the Victoria inquiry this week, he said: “There is a very significant population of Crown who are crying out for the ability to speak up, the ability to be involved, the ability to restore the pride in the organization that they used to feel.”

Pandemic restrictions take their toll

Adding to its list of woes, Crown Resorts has struggled financially as COVID-19 restrictions continue to impact the casino industry. “Crown continues to operate in an uncertain environment with a number of factors expected to impact financial performance throughout the 2022 financial year,” the company said in a statement to the Australia Stock Exchange Tuesday.

From June 26, authorities imposed a two-week lockdown on Sydney to curb the spread of the highly infectious Delta variant of coronavirus. Meanwhile, Crown Perth and Crown Melbourne have faced intermittent closures and capacity limits throughout the year.

Crown has revealed that it expects to report losses for the financial year ending June 2021. The operator has forecasted EBITDA of between AU$90m (US$67.7m) and AU$100m (US$75.72m) for the full financial year. The company has not provided estimates for annual losses but will announce its full results on August 30.

As Crown continues to struggle financially, multiple interested parties have made buyout offers for the casino company. In May, Star Entertainment made a non-binding nil-premium offfer of 2.68 of its shares for each Crown share. Crown rejected the Blackstone Group’s cash offer of around AU$8.36bn (US$6.58bn) later that same month. Meanwhile, Oaktree Capital Management has offered to buy back as much as AU$3bn (US$2.36bn) worth of Crown’s shares from majority owner James Packer.

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