PRC busts $1.5b World Cup Bitcoin gambling pyramid scheme

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Two men watch a 2018 Russia World Cup football match on a TV screen outside a restaurant in Beijing. Photo: AFP/Greg Baker

Police in south China’s Guangdong province announced this week that a suspected $1.5 billion illegal football gambling syndicate, that is said to be underpinned by a crypto-currency “pyramid marketing” scheme, has been smashed.

Reports from Xinhua, say authorities made 540 arrests, froze assets of more than 5 million yuan and confiscated virtual currencies worth over 10 million yuan. The syndicate, that was said to involve 20 different “gangs” that recruited 330,000 members in only eight months, used 70 mobile apps and websites as well as 250 online chat groups. Recent syndicate activity was allegedly focused on World Cup matches.

Gambling is illegal in China although officially managed “games of luck,” that are run for charity by China’s Sports Administration from a multitude of “lottery shops” across the country, are allowed. The main one of these is the National Sports Lottery and is now said to be the second biggest lottery in the world. Only the Spanish Christmas Lottery, with its staggering US$800 million “El Gordo” jackpot, is thought to be bigger.

Despite China only having ever qualified for one World Cup, in 2002 when it did not win a game, there is still huge interest in the tournament. Something like 300 million people in China tuned in to watch each of the three games in 2002 and general interest in this World Cup has also remained very high.

According to AFP, data from the China Sports Lottery Management Centre shows turnover at the official lottery shops from football-related betting in the three weeks up to July 1 was worth close to 29 billion Yuan (more than $4 billion), while in the three previous weeks – as in before the World Cup – it was less than five billion yuan.

These figures of course do not reflect the billions more that are raked in by China’s vast underground gambling networks. These operations, that have long been linked to a host of football match-fixing incidents across the globe, are run from a myriad of Chinese-language websites that have servers based outside the PRC.

Many of these were linked to the Cagayan freeport in the Philippines, but after the country’s tough-talking president, Rodrigo Duterte, instigated a clampdown, Cambodia and Vietnam now appear to become hubs.

In the recent Guangdong operation, police say they noticed in May that an online gambling platform was accepting Bitcoin, so they launched an investigation. They say they discovered a worldwide gambling platform, that had operations across the world and was accepting payments, and making payouts, in the Bitcoin, Ether and Litecoin crypto-currencies. The syndicate’s network was based on a multi-tier pyramid model that encouraged “agents” to bring in new members in return for commission payments, again paid in crypto.

Guangdong police say the action was part of the wider nationwide “Online Clean and Secure” operation that was set up to specially target illegal web-based gambling during the World Cup.

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