Crown hit with $55m lawsuit over fugitive tycoon Michael Gu’s gambling sprees

Crown is now facing the music for gambling sprees by one-time hotel mogul Michael Gu who fled overseas as his empire imploded five years ago.

Failed property tycoon Michael Gu, a luxury Rolls Royce Wraith he once owned and Crown Casino where he is accused of gambling away iProsperity Group’s funds.

Fallen property tycoon Michael Gu was a whale on the casino scene when his iProsperity Group was riding high. But his lavish spending sprees at Crown Melbourne could come back to bite the gaming giant.

Crown Resorts is now facing a $55m lawsuit from the liquidators of the fugitive businessman’s collapsed hotel and development empire. The casino company is facing the action five years after Mr Gu’s elaborately constructed network of companies crashed owing more than $400m, leaving a trail of destruction that caught out investors from across Asia.

He fled Australia, with sightings rumoured as far away as Canada after he obtained a Vanuatu passport, before re-emerging in Hong Kong, where he has been meeting business acquaintances. But Cor Cordis has been chasing a return for creditors, conducting public examinations and winning private funding for the case.

Cor Cordis’s Jeremy Nipps and Barry Wight have identified that more than $55m in company funds were transferred either ­directly or indirectly to Crown ­casino in the five years before their appointment in July 2020.

The money is alleged to have been paid to Crown casino for the benefit of the company’s directors and officers, Mr Gu, Harry Huang and Chun Zhou, to gamble. Both Mr Gu and Mr Huang fled Australia shortly after the liquidators’ appointment.

The liquidators said in a statement that they believed the funds ought to be repaid by Crown for the benefit of creditors and investors. Proceedings have now commenced in the NSW Supreme Court against Crown, alleging that the casino knew or ought to have known that the funds were company monies and that the transactions were made in breach of the directors’ duties owed to iProsperity entities.

Crown Resorts is now facing a $55m lawsuit from the liquidators of fugitive businessman Michael Gu’s collapsed hotel and development empire.

“This proceeding marks an important milestone in our prolonged efforts to recover funds for the benefit of creditors. Given the scale and seriousness of the ­alleged conduct, we believe it is appropriate for the court to consider whether Crown casino should be required to repay funds that we allege were misused company monies. Our objective remains to maximise returns to creditors and investors and hold parties to account where appropriate,” the liquidators said in a statement.

The casino operator, now owned by US private equity giant Blackstone, has pledged to turn over a new leaf, after agreeing to a plan to pay out $450m in penalties for breaching anti-money-laundering laws at its casinos in Melbourne and Perth from 2016 until March 2022. Blackstone completed its acquisition of Crown Resorts in June 2022.

The company has since won regulatory favour as it weighs a play to run the casino operations at Brisbane’s Queen’s Wharf precinct while the future of rival ­operator Star remains in limbo.

But the casino’s tight relationship with Mr Gu in the heyday of his real estate funds company will come under scrutiny in the court case. The iProsperity business came crashing down after the pandemic struck in 2020 and investors demanded payment from Mr Gu as his company’s deal-making soured.

He claimed at the time that it was the “Chinese way” not to keep company documentation but left creditors and investors out of pocket in one of the largest company failures of the decade involving allegations of misappropriation and fraud by the fund operators.

Mr Gu had a penchant for fast cars and, in the early days of the collapse, the liquidator seized a luxury 2017 Rolls-Royce Wraith, while a 2015 McLaren Spider was deemed uncommercial to realise. The unwinding of another part of the iProsperity empire revealed some funds had gone on a Lamborghini, which was sold off. Luxury properties were also disposed of in Mosman and in the Sydney CBD.

Crown declined to comment.

Originally published as Crown hit with $55m lawsuit over fugitive tycoon Michael Gu’s gambling sprees