By Carla Jaeger and Sherryn Groch
The liquidators of one of Australia’s biggest Ponzi schemes are planning to sue casino giants Crown and The Star for as much as $70 million over allegations that millions of dollars of stolen funds were laundered through their casinos.
International fugitive Michael Gu convinced wealthy investors he was a hotshot property developer, but when his $600 million iProsperity empire collapsed in 2020, it was revealed that more than half of the funds had vanished – spent on luxury cars, multimillion-dollar gambling sprees and expensive personal loans.
Michael Gu and (inset) the Sydney building his company owns. Credit: James Alcock
Both Gu and his offsider Harry Huang fled Australia in the days following its collapse, and liquidators have spent years poring over the money trail, hunting for the missing millions dudded from investors.
The iProsperity empire sprawled across 64 companies. Run out of high-end offices in Sydney and Melbourne, it amassed a spectacular debt of at least $400 million. While much of the stolen funds have vanished, liquidators have traced at least $175 million they believe they can recoup via lawsuits.
About $70 million of that leads to Crown and The Star. Liquidators claim that emails show signs Gu and Huang were laundering some of the loot through the casinos – and that there were red flags that should have been noticed.
On Friday, the Victorian Federal Court approved a funding proposal for a lawsuit to claw back the money funnelled through the casinos, as well as from other individuals and companies connected to the scheme. The suit, which is yet to be filed, will be led by liquidators Barry Wight and Jeremy Nipps, of restructuring firm Cor Cordis, and bankrolled by a private litigation funding firm.
When Gu vanished in 2020, his Australian bank accounts held less than $60,000. Liquidators sold his fleet of luxury cars, a $12 million Mosman residence and beachfront Seaforth home to repay investors, but efforts to chase the fugitives Gu and Huang for more hit a dead end.
Gu was a VIP at Crown and The Star and close to a senior staffer at both casinos. In 2018, he also purchased a $32 million controlling stake in Canberra Casino, but the deal collapsed when it failed to meet regulatory approvals.
In their initial 2020 report to creditors, iProsperity’s liquidators noted at least $8 million in client funds were moved to Crown via company accounts, which Gu then either withdrew or used for gambling. Huang also transferred “in excess of $40 million” into Crown accounts between October 2016 and June 2020, at least a quarter of which was believed to be stolen investor funds.
The development on Friday sets the stage for a potential courtroom battle for Crown, which has been on a reputation rescue offensive since this masthead revealed a series of scandals tying the casino giant to organised crime and money laundering. The Star has also been slapped with new restrictions and penalties following revelations of its own links to international crime.
In 2021, when allegations the iProsperity fraudsters had laundered cash through Crown casinos first emerged, Crown said it launched an inquiry. But the reports were not examined by a royal commission then running into its fitness to hold a gambling licence.
Casinos are often used to clean dirty money by disguising the proceeds of crime as gambling winnings. But casinos are required to monitor for suspicious activity, such as customers depositing and withdrawing cash without visiting the gambling tables.
At an inquiry into The Star casino group’s fitness to hold a gambling licence, it emerged that Gu had no recorded play between June 2011 and December 2017, despite being a patron there. But from late 2017, his buy-in exceeded $84 million, before he fled Australia.
The Star didn’t close Gu’s account until two weeks after iProsperity collapsed, and waited another year before closing Huang’s account.
The company has denied that it deliberately ignored the risk Gu was using stolen investor money to fund gambling at its casinos.
Crown and The Star did not respond to requests for comment.
IProsperity was one of the biggest players in Australia’s significant investor visa initiative (SIV) – a government program that offers residency visas for those investing at least $5 million here, popular with wealthy Chinese nationals.
The collapse of the group had ripple effects. Sydney’s Canada Bay mayor Angelo Tsirekas was sacked last year after NSW’s anti-corruption watchdog found he had engaged in serious corrupt misconduct by accepting perks and payments from iProsperity in exchange for favourable planning decisions. Those perks included overseas flights to China, luxury hotel stays and nightclub trips. Tsirekas was not involved in the fraud case.