JPMorgan Chase offloads stake in Star Entertainment

JPMorgan Chase has divested its stake in embattled Australian casino operator Star Entertainment, according to an exchange filing released today (23 December).

The investment banking giant previously held 5.09% of the company’s voting power, as noted in a separate filing just days earlier. The development comes as Star Entertainment struggles with a series of challenges that have severely impacted its operations and market performance.

Star Entertainment, Australia’s second-largest casino operator, has been facing a storm of issues that have battered the Australian gaming industry in recent years.

The company, alongside its larger competitor, Crown Resorts — now owned by Blackstone — has been the subject of multiple regulatory investigations. The inquiries have centred on allegations of misconduct, including money laundering and governance failures.

Adding to the regulatory scrutiny, Star Entertainment has grappled with a sharp drop in tourist activity and extended casino closures due to the pandemic, which have significantly eroded its earnings.

The company’s share price has plunged to multi-year lows as it contends with liquidity pressures and an increasingly challenging operating environment.

Ongoing regulatory investigations and allegations

Star Entertainment has been under intense regulatory examination since 2022. Authorities have accused the operator of serious governance failures, including inadequate measures to prevent money laundering and enabling operations that skirted financial regulations.

These allegations emerged after investigations revealed that high-value gamblers were allegedly able to circumvent regulatory checks, with funds being funnelled through opaque channels including accounts associated with Chinese debit cards.

The company has also been implicated in failing to manage risks tied to criminal activity. Regulatory inquiries revealed that Star allegedly allowed individuals with criminal links to gamble large sums at its casinos, often under lax oversight.

These revelations have prompted significant penalties and the implementation of stricter operational controls, yet the damage to the company’s reputation and financial stability has been profound.

Legal threats linked to fraudster

In a separate but related legal matter, liquidators pursuing the assets of Michael Gu, a fugitive corporate fraudster, are preparing to file lawsuits against Star Entertainment and Crown Resorts.

Gu, who vanished in 2020, left investors of his collapsed iProsperity Group with losses of approximately A$391m. Prior to his disappearance, Gu, alongside his associate Harry Huang, reportedly gambled millions of dollars at Star Sydney and Crown Melbourne.

According to The Sydney Morning Herald, the liquidators plan to seek up to A$71.8m in damages from the two casino operators, arguing that the large-scale gambling activity was indicative of money laundering.

Court filings are expected to claim that the casinos failed to detect or report suspicious transactions tied to Gu’s ill-gotten gains, potentially enabling the dissipation of funds that should have been safeguarded for creditors.

Share