Chinese authorities arrested 39 people, including esports industry execs, as part of a crackdown on underground real-money poker games.

In April, Chinese authorities targeting real-money underground poker games operating with the assistance of play-money Texas Hold’em poker apps on social platforms arrested 39 people during a major series of raids aimed at stopping the illicit activity. Among those arrested were three high-ranking executives of?Beijing Lianzhong Company (“Lianzhong”), a major subsidiary of Ourgame, one of China’s leading gaming developers and promoters.

The three Lianzhong executives arrested, according to a report from the Beijing News Agency, occupied prominent marketing and public outreach positions with the company, which is the primary Ourgame subsidiary for its esports division, encompassing chess, bridge, and other mindsports such as poker.

The three arrested Lianzhong execs, identified only by surname according to China’s reporting rules, were:?Lianzhong’s executive vice president of Lianzhong,?Qinyou; the head of the chess and cards (esports) division, Xu; and Zhou, the head of the VIP relations (“large customer”) department. The 36 others arrested were likely the underground games’ organizers (“agents”), the recruiters and bankers of some of the hundreds of private games attempting to operate in a clandestine manner. Only one of those was named, a “silver merchant” (banker) named Zhang.

The arrests indicate that Chinese authorities believe Lianzhong played some contributory role in allowing the real-money, underground games to flourish, separate from the sale of play-money coin or gem packages within Ourgame’s and Lianzhong’s “Dezhou Poker” apps. (“Dezhou” is the English-character translation of the Chinese word for “Texas”.)

Those apps, along with others from different gaming developers such as Boyaa Interactive, were used as the virtual gaming engine to drive the real-money poker games. Using the apps instead of traditional cards, chips, and money saved the private games’ participants the risk of having to meet in person, where such gambling activity is illegal across mainland China.

Nonetheless, the Chinese authorities, including China’s Ministry of Public Security, seized or froze considerable sums from those arrested. According to the BNA report, the total tied directly to the April arrests topped ￥65m (about €8.6m, or about US$10.25m).

In-game coin sales profitable

The investigation also delved into Lianzhong’s income from its Texas Hold’em apps and found that the company had generated sizeable revenue from the sale of the app and the in-game coin or gem top-ups. Since 2010, the company booked?￥335m (about €44.35 million, or about US $52.8 million).

That revenue stream appears imperiled as of June 1, when China’s ban on apps, poker-related threads on chat services, and other edicts targeting the underground games go into effect. Ourgame is generally reported by Chinese business outlets as the second-largest poker-related gaming developer serving China’s massive social market, behind Boyaa.

Ourgame, however, may take the larger international hit. In 2015, the company picked up the US-centric World Poker Tour (WPT) in a US$35m (€29.4m) deal. The deal served dual purposes besides rescuing the cash-poor WPT, owned at that time by struggling bwin.party. The deal served as a prominent cross-marketing tool to complement Ourgame’s and Lianzhong’s introduction of poker to its growing esports customer base in China, and it also promised a possible, prominent Pacific Rim presence for the WPT. However, the WPT has never held an event in China, and the odds against one in the near future have grown longer in the wake of recent events.

Earlier raids, other arrests

The BNA report also offered details on two other happenings from January that also targeted China’s clandestine real-money poker scene. Those two events involved separate series of raids targeting the games and, along with the April happenings, helped frame the recent ban on many poker-related offerings as more an escalation of authoritarian tactics rather than an isolated event.

The two series of arrests in January also merit attention. In one, China’s national?Ministry of Public Security coordinated with authorities in the country’s populous eastern province of Zhejiang to break a large group of private, app-powered poker clubs utilizing a “797” poker app. All told, 52 suspects were arrested, and a massive ￥330m (about €43.75m, or US$52m) was seized.

In the other, China’s national investigators teamed with authorities in Jilin province to break another group of rings utilizing the social-poker apps and another networking app, “De Friends Circle”, to recruit and build more private clubs and games. Hundreds of discussion boards offering De Friends Circle poker threads have recently been deleted. This investigation spread to 30 cities in seven different Chinese provinces and included several employees at a networking company in Chengdu, in Sichuan Province. The seized funds associated with this group of arrests was the largest of all, at over one billion RMB (equivalent to yuan). That also equates to about €132.5m, or US$156m.

The outsized sums involved also back up reports of the size and number of the underground poker clubs. Earlier reports of a thousand or more private clubs being operated, each with as many as five hundred players, indicates that the underground China poker scene was thriving. That may now be set back for several years, given China’s continuing stance on banning most major gambling activity across its mainland and allowing it only in coastal enclaves such as Macau.