Patrick Jay works his way through a cut of meat. Jay is the head of the sportsbook at the Hong Kong Jockey Club. This may be the most profitable sportsbook in the world, though such rankings are impossible to calculate, given the nature of the business. Jay explains that the Hong Kong Jockey Club handles roughly $6.5 billion in betting on soccer per year. From its entire gambling portfolio, the book takes $1 billion in profit annually. The Hong Kong Jockey Club is the largest taxpayer in Hong Kong, representing 8 percent of the local budget.
Jay is a tall, large-boned man, with the gregarious and happily ravenous manner of someone whose strategic decisions have guided him to a windfall. He projects the attitude of that rare animal, the winning gambler. Jay is one of an expanding cast of Englishmen come east. They carry expertise in the traditional, respected, English way of making a book—at shops like Ladbrokes and William Hill—and they now apply these business principles to Asia, where their experienced hand is welcomed. The Asian market has grown exponentially in the last decade. Jay estimates that the market represented about $100 billion at the turn of the millennium. Today, he says, Asian gamblers wager $1 trillion on sports per year. “The numbers are absolutely unfathomable to everybody,” Jay says. “People back in the U.K. don’t believe it. If you show them financial numbers, they say, ‘You’re making this up. You got Enron to do your accounting for you.’ ” It is not only the size and growth of the Chinese economy that has attracted so many in Western gaming. Nor would adventure be a sufficient motive for someone as oriented to business as Jay to relocate this far from home. It is habit most of all that draws people in Jay’s line—Chinese habit, the role that gambling plays in Asian cultures, the well-documented acquaintance with risk. This, as much as Asian economic dynamism, is the guarantor of continued growth in the gambling business. Jay’s research tells him that in Hong Kong, locals allocate upward of two and a half times more of their disposable income for gambling than do people in the United Kingdom. “Asia is not the center of the universe,” Jay says. “Asia is the universe.”
Jay’s sportsbook is located at, unsurprisingly, a racetrack. It is public, open, legal. And it is categorized in the minority. Throughout nearly all of Asia, the most active gambling continent, gambling is illegal. It is illegal to bet on sports on mainland China, for this activity is antithetical to the precepts of the communist state. The Muslim religion does not permit gambling for Indonesia’s 250 million people. This doesn’t mean that legal statutes prevent gambling. On the contrary, illegal, unregulated bookies in China, Indonesia, and all across Asia predominate. Jay claims that the illegal betting market is ten times larger than the legal market. Of the $1 trillion total, he says that $900 billion is wagered in the dark, administered by the criminal entities that finance, regulate, and enforce a parallel industry.
At Wooloomooloo, lunch draws to a close, and Patrick Jay readies to make a demonstrative point. “Look around the restaurant,” he says. “What do you see?” There are tables full of what appear to be businessmen in the midst of congenial lunch meetings. There are a few romantic couples sharing their little moments. At other tables, friends speak loudly with one another, then laugh. It is the usual steakhouse crowd, but for one missing element. “No booze,” Jay says. He’s right. Plates of steaks and potatoes cover the tabletops, but no single glass of beer or whiskey accompanies them. “These people don’t spend their money on alcohol. They gamble.”
China’s market reforms of the late twentieth century incited one of the most remarkable periods of localized economic growth that the world has ever experienced. Throughout the 1990s, the Chinese economy grew at a rate of roughly 10 percent per year. In rapid fashion, this swelling generated both great personal wealth for some individuals and general liquidity in Chinese society.
While this miraculous event was unfolding, so was an episode of even greater global significance and revelation. During this period, the Internet was growing from a computer engineer’s curiosity into the world’s primary means of commerce and communication. At the moment that many millions of Chinese people all of a sudden possessed disposable income, there was a new place to play with it. When these fortunate Chinese considered how they might float their new wealth for the enjoyment and risk that had long been a central part of their culture, they were presented with a growing number of gambling options online.
The emergence of the Internet not only precipitated the growth of online betting sites, but also improved options for the gambler. Before the Internet, the corner-store bookie, such as Ladbrokes, had little incentive to offer its clients competitive odds. It possessed a quasi-monopoly, defined by location and the immobility of the gambler. Internet betting introduced choice to the betting market. A new catalogue of gambling sites began dropping odds and commissions in the competition to attract business.
In China, the new bourgeoisie within this population of 1.3 billion people flooded the Internet gambling market. As the millennium turned, European sportsbooks followed the lead of their Asian counterparts, establishing online portals. Eventually the European and Asian markets began to work in concert, online, following each other’s price and line movements, bookies on one continent laying off bets with bookies on the other as part of their risk management strategy. Asian books established European-registered subsidiaries under different names, the client none the wiser. As happened with other industries as they migrated online, in gambling, national borders dissolved. In short order, the Internet enforced global regulation, of a sort, on a largely unregulated, gray-market, underground industry.
“The Asian and European betting markets have come together and created one giant pool,” says David Forrest, an economics professor at the University of Salford, in Manchester, England, who specializes in the study of sports gambling. “It’s now one huge liquid market. And liquidity is the friend of the fixer. You can put down big bets without notice, and without changing the odds against yourself.”
The Internet altered what people bet on, as well as the way that they bet. Twenty years ago, roughly 15 percent of bets on the international sports market were placed on soccer. But as the Internet enabled betting houses to offer continuous propositions based on the various factors of a game in progress—including the time remaining, the score, the players on the field, and the intuition of the bookie adjusting the line and the odds—the rise of in-game betting enhanced the popularity of soccer as a gambling proposition. The game now accounts for roughly 70 percent of the international sports betting market, according to Interpol estimates. The Internet also allowed for a rise in the trading of bets between bettors. International gambling on soccer matches has come to resemble a stock market, with constant fluctuations, numerous propositions, and instantaneous arbitrage.
Along with these changes came heightened scrutiny on soccer matches and the valuable information secreted within them. Patrick Jay tells the story of a grizzled old bookie he worked with at Ladbrokes. “In 1995,” the man liked to say, “if the midfielder for Manchester United broke his leg, five people would know about it. His wife, his father, his coach, and his trainer. And me.” Now, said the man, if a minor injury afflicts an inconsequential player on an unknown club, “they’re betting $10 million on it in that Macau.”
Before the Internet, one of the only ways to bet on soccer was on the 1x2 market. The “1” represents a victory by the home team. The “2” represents an away-team win. The “x” represents a draw. The 1x2 market does not incorporate a line, or a point spread. Odds are simply established for the chances of each of the three possible outcomes. The final score is irrelevant. When the favorite builds an insurmountable lead in a match, the gambler doesn’t have much incentive to watch anymore. Despite this, the 1x2 market remains the most popular form of soccer betting in Europe.
Almost no one in Asia bets 1x2. The majority of people betting on soccer in the world—and this includes all sizable international match-
fixing groups—operate on the Asian handicap and Asian totals markets. Locally known as hang cheng, the Asian handicap market takes the draw out of soccer betting. In essence, you bet on one team to win by an assigned handicap, or on the other team to lose by this same handicap. Bookies establish a point spread that recognizes one team as the favorite. They also assign odds to each bet. The odds place a number value on the chances of a proposition and thus the payout on a winning bet. The Asian totals market, on the other hand, offers the chance to bet on the number of goals scored in a match in aggregate, the over-under. Except for a few minor differences, the Asian handicap and the Asian totals markets are identical to the markets for betting on the NFL or NBA, in the United States.
In the European Union, bookmakers have been known to report their clientele to the police for suspicious betting patterns. You must bet with cash or a debit card, not on credit; that puts a hard cap on what you may wager, as you must possess the required funds to cover potential losses. Betting limits are low in Europe. Some European books ban gamblers who win too much or too frequently.
Betting is different in Asia. You can bet anonymously and on credit, and you can win as much as you like. Some bookies in Asia even welcome match-fixers, since the bookies can utilize inside information for themselves, laying off the fixer’s bets on other books while adding in some money of their own. These factors contribute to the popularity of the Asian handicap market. This makes it highly liquid. Because there is greater liquidity in the market, bookies take more bets at higher limits.
Most remarkable about the Asian handicap and totals markets is the speed with which they move while a match is in progress. The sportsbooks alter the odds on a bet, and often the line itself, numerous times during a game. In some matches, depending on the play on the field and the betting action that a bookie is receiving, the odds can change every minute, or more often. This affords the fixer a great opportunity, but only if he can think quickly, and only if he has tight control over his compromised players and referees. A match-fixer will routinely sit in the stands at a game, wearing a brightly colored hat, making himself highly visible to his players. He watches his smartphone for the minute-by-minute fluctuations in the Asian handicap and totals markets. When he recognizes the opportune moment to place a bet, he will do so. He’ll then take his hat on or off, or turn it to one side or another, communicating an agreed-upon signal to his players on the field. It’s time to score, time to let one in, time to instigate a red card, or time just to run out the clock. These movements are often coordinated with the syndicate in Asia, which communicates with the fixer in the stands by phone, relaying its directives through him to the players as the action of the match unfolds.
The general limit for betting an English Premier League match on the Asian handicap market is £50,000, or roughly $80,000. But this limit is “per click,” not per match. Each time the bookie changes the line or the odds, setting a new price, the gambler can place a new bet. Bookies routinely alter the odds hundreds of times per match. If a bookie changed the odds just once per minute, a gambler could place ninety bets over the course of a match. That’s £4.5 million, or $7.2 million. Each bookie often lists multiple lines per match. There are hundreds of bookies taking bets online. And in Asia, gamblers can bet, through the agenting system, ten times the per-click limit of £50,000. Conceivably, on the Asian market, one gambler could place hundreds of £500,000 bets with one bookie on one match throughout its duration. The size of the marketplace is staggering, as are the nerve and wit necessary to manipulate it.
The new mass and complexity of the global betting market extended a lucrative business prospect to those who could scheme the system in their favor, a new opportunity for crime on a massive, transnational scale. The Chinese criminal groups that were benefiting from the blossoming domestic economy, and which largely controlled Asian betting, were eager to find a way to manipulate the market in their favor.
“We had known for some time that Southeast Asia had a robust illegal gambling market,” says Ron Noble, Interpol’s secretary general. But even Interpol was caught flat-footed by the millennial changes. “You look at the money and you say, ‘Would organized crime like to influence the outcome of these bets?’ Yes. The numbers are so huge that nobody can quantify them in a reasonable way.”
The windows in Patrick Jay’s corner office in the company tower provide a vivid image of the Hong Kong Jockey Club. Situated in Happy Valley, the horse track oval is kept pristinely, lushly hemmed in by the Tai Tam mountains. The valley was once a cemetery, but now it is full of life. Sports facilities populate the infield of the racetrack—tennis courts, soccer fields—and high-rises ring the greater scene. “There’s not an apartment here for less than one million dollars,” Jay says. As Jay looks down at the track, several coaches run a group of children through drills on one of the infield’s soccer fields. Jay says that this is a youth soccer camp.
Then his talk turns away from games, and toward the business lessons he has learned while stationed here so far from home. “In Asia, the world is not as it seems,” Jay says. “There is multilayered ownership of banks, sportsbooks, businesses. The Chinese way of doing business is that everybody gets a percentage. Everything you learned at Goldman Sachs, Ford, McKinsey—once you get to mainland China and Hong Kong, just forget it.” Jay takes a seat behind his desk. Above him on the wall hangs a Chelsea jersey in a frame. The autographs of the players of the 2009–2010 team cover the fabric.
It is Jay’s business to know his competitors in the gambling market, what they are doing, whom they represent, where their money comes from, and where it goes. It is important to know all these things. Yet though Jay sits in their midst, they largely remain a mystery, in the black market and out in the open, their structures raveled across continents and shell companies and empty names.
“The issue in all of this is that we don’t know what the issue is,” he says. He rattles off the names of some of the largest sportsbooks. “IBC, SBO, 188Bet. There are so many shades of gray. Illegal Asian gambling syndicate? Show me a legal gambling operation. Then show me an illegal gambling operation. Then show me the difference between legal and illegal.”
During these recent years of the Asian gambling boom, when soccer’s biggest clubs have succeeded in becoming thriving business entities, attaining immense value, a similar blur has overcome the distinction between the game and gaming. Professional soccer players the world over, from the English Premier League on down, play the game with the logo of a bookmaker on their jerseys. Every one of the twenty clubs in the English Premier League has a sponsorship deal with a bookmaker, a club’s so-called betting partner. Manchester United’s betting partner is 188Bet, one of the largest in the world, registered on the Isle of Man. Sure, this is business—the companies paying for the privilege of association, like any other sponsor—and there is no point in being prim about it. But associations matter.
“These behemoths are bigger than hedge funds,” Jay says. “But how much do we really know about them?” He looks again through the window and down below him, at the soccer academy on the territory of the gambling outfit. “That’s Manchester United down there,” he says. The club is in the midst of an off-season Asian swing, players and coaches running these children through their paces. The most popular club in the world gets around.
CHAPTER 7
Hong Kong has so many bars like this one that it is difficult to remember which names belong to which places. Second-floor slit windows overlook the street. Track lights flicker in the darkness. There are a few girls leaning against the bar in the tired way that professionals lean against bars. It’s early, so there is still room to move. Music blares anyway, so William asks for a page out of my notebook. He must write to get his delicate point across.
In Asia’s illegal gambling industry, William is what you may call a facilitator, which is why he prefers to utilize an alias. Thus concealed
, he is happy to explain the architecture of the industry. The illegal betting world operates on a system of vouching. It is like joining a country club or a fraternity, though with greater ultimate consequences should conditions for the member go south. A prospective gambler gains entry to this world via the recommendation of a contact who already circulates within it. Once he passes muster as someone who will settle his debts, the gambler receives an account with someone who is known as an agent. The gambler places his bet with this agent, who then passes the wager to his superior. This person is known as a master agent, one step up in the hierarchy.
Above this master agent is the super agent. Of these, there are few in the world, and they are almost all Chinese. This man is a trusted, known criminal figure—a face—who can handle upwards of $50 million in bets. The super agent distributes his bets to the many legal and illegal books with which he has relationships, his initial $50 million stake often divvied up into smaller wagers throughout the shadow system. If a gambler loses a bet with his direct agent, someone higher up the chain of command may ultimately come calling.
That is how the money enters the structure. How does it travel through the system? The illegal betting world is so complicated that it requires many diagrams to understand it, and that is why William is drawing. For about fifteen minutes, he constructs an intricate flowchart, representing the way that money circulates through the Asian market. Cash moves from gambler to bookie through Chinese bank accounts in the names of “genuine but anonymous people,” as William labels things. Finally, via a “money changer,” the lost money of the gambler exits through a corporate entity, into the pocket of the criminal organization. William points to the money changer on his chart. “This is the guy,” he says. “Without him, they’re dead in the water. This is the guy who takes money from offshore to onshore.” Then he says, “You think the chain stops here. It doesn’t. It goes up. Way up.”
The Big Fix Page 5